The biggest change with the new Tax Cuts and Jobs Act is the standard deduction amount which is now nearly doubled to $12,200 for 2019 tax year. This deduction is not the only thing that doubled with the change, Child Tax Credit which also doubled from $1,000 in previous years to $2,000 for 2019 tax year through 2025. The good news on the child tax credit isn’t entirely about the doubled amount, as much as $1,400 of this credit is now refundable. To those of you unfamiliar with this credit let us explain what the Child Tax Credit is all about.
This credit is one of the most significant tax credit for the taxpayers who are eligible with qualified dependent children under the age of 17 (16 or younger by the end of the tax year). Unlike an exemption which is used to reduce your taxable income, a credit is much more valuable since it actually reduces the amount of money you owe to the IRS. Since a part of it is refundable, you could get more refund and not just a subtraction of the taxes owed.
What are the qualifications for the Child Tax Credit?
There are a series of six tests to meet the qualifications for the Child Tax Credit, age, support, dependent, citizenship, relationship, and residence. To qualify,
- The child must be under the age of 17 (16 years old or younger at the end of the tax year).
- The child must not have provided more than half of herself/himself support for the year.
- The child must be claimed as a dependent and that you provided more than half of their own support for the tax year.
- The child must be a U.S citizen, U.S resident alien, or U.S national. And must have a Social Security Number.
- The child must be directly related to you such as daughter, son, stepchild, adopted child, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals including niece, nephew, and grandchild.
- The child must have lived with you more than half of the tax year.
Once all of the qualification tests are done you claim the Child Tax Credit if your modified adjusted gross income is less than $400,000 for married taxpayers filing jointly, and less than $200,000 for heads of household and single filers.