Make the most of child tax credit this year


December 2, 2018 at 12:00a.m.

By TINA OREM

NerdWallet

The wallet-emptying experience of raising kids understandably fuels a lot of interest in the child tax credit, but thanks to some big changes recently, the fascination could reach Tickle Me Elmo-like proportions. Here are a few things tax pros say you should know about this credit and how you can take maximum advantage of it on your tax return.

DOUBLE DOWN

One of the most notable changes to the child tax credit in 2018 is that it doubled from $1,000 per kid to $2,000 per kid. Even though the end of the personal exemption in 2018 may eat away at some of those tax savings, many parents will most likely see a benefit, says Chad Harrison, a certified public accountant in Mason City, Iowa.

There are other factors to think about, adds Michael Ruger, a partner and chief investment officer at Greenbush Financial Group in East Greenbush, N.Y. For example, the child tax credit is more potent than a tax deduction.

STOP ASSUMING

Last year, the child tax credit started phasing out for single filers with modified adjusted gross incomes of more than $75,000 and for joint filers with MAGIs of more than $110,000. For 2018, however, the phase-out doesn’t start until single filers hit $200,000 MAGI and joint filers hit $400,000.

That’s a game-changer, according to Harrison.

“It has drastically increased the amount of money a person can make and still qualify for the credit,” he says.

WHO ELSE do YOU SUPPORT?

The child tax credit has a new little brother this year – a credit that can knock $500 off your tax bill for each of your qualifying dependents other than children. Aging parents and adult children might fall into this bucket – if they meet the IRS’ somewhat complicated definition of a dependent, Harrison says.

Relationship, age, residency, special-needs status and filing status are some of the factors the IRS considers, which is why giving a down-and-out friend or relative money to pay the bills doesn’t necessarily make you eligible for this credit, he cautions.