The New Child Tax Credit

Recently, the Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump. One of the tax reform changes includes a new child tax credit. How will this affect you when filing your 2017 tax returns? I am sure many people are going to be really disappointed when they file their tax returns this year.

Here are the changes you have to look forward to when filing your return in 2017.

The child tax credit, was introduced by 1997 legislation and was first available in 1998. It started as a nonrefundable credit of $400 for each qualifying child under the age of 17. In the last 20 years, it has undergone many changes. Under pre-TCJA law, the CTC was worth up to $1,000 per qualifying child and was refundable for taxpayers with earned income of at least $3,000. This was phased out for taxpayers with an adjusted gross income above $75,000 ($110,000 for joint filers). These rules remain in effect for 2017 tax returns (filed in 2018). The TCJA eliminates the dependent exemption itself, but retains the definition of dependent to claim the CTC and other child- or dependent-related tax benefits.

• The CTC is worth up to $2,000 per qualifying child. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit).
• The refundable portion of the credit is limited to $1,400. This amount will be adjusted for inflation after 2018.
• The earned income threshold for the refundable credit is lowered to $2,500.
• The beginning credit phaseout for the CTC increases to $200,000 ($400,000 for joint filers). The phaseout also applies to the new family tax credit.
• The child must have a valid SSN to claim the nonrefundable and refundable credit.

Rule 15—Earned Income Limits

$48,340 ($53,930 for married filing jointly) if you have three or more qualifying children,

$45,007 ($50,597 for married filing jointly) if you have two qualifying children,

$39,617 ($45,207 for married filing jointly) if you have one qualifying child, or

$15,010 ($20,600 for married filing jointly) if you don't have a qualifying child.