Do you have a child who turns 17 in 2019? If so, you may be in for a tax hike next year. Why? Because the child tax credit ends the year your child turns 17 years of age. This has always been the case, but it’s a bigger deal now for two reasons:
- Child Tax Credit doubled from $1,000 to $2,000
The Tax Cuts and Jobs Act (TCJA) doubled the credit from $1,000 to $2,000 per child starting in 2018 through 2025. As an added bonus, up to $1,400 of this credit is refundable.
- More families will be eligible for the Child Tax Credit
Under the old law, the child tax credit started to phase out when income for married filers reached $110,000. But the new law boosts the phase-out threshold to a generous $400,000 for married filers, $200,000 for all others.
The doubling of the tax credit and the broader eligibility will provide a significant tax break for most parents. But when your child turns 17, this generous tax credit abruptly goes away, and to many taxpayers, this may feel like a tax hike.
A New Credit for Other Dependents
Fortunately, there’s a new credit that will slightly cushion the blow. This new credit is worth $500 per eligible dependent and is available for your dependent children who don’t qualify for the $2,000 child tax credit. Unfortunately, the credit for other dependents isn’t refundable.
What Should You Do?
Your employer doesn’t know that your son or daughter is turning 17, so you may need to adjust your withholding accordingly. But the main thing you might need to do is simply adjust your expectations in the year your child turns 17. Your refund is likely to be much less, and if you are the parents of twins or multiples, the impact could be enormous.
Do you have a child approaching the age of 17? Contact our office to find out how the TCJA will impact you.