03/06/2019
Dear Client,
Have Dependents? Tax Law Changes Might Affect You
1) Changes to the Child Tax Credit
If you took advantage of the child tax credit in 2017, you were able to claim a $1,000 credit on your income tax return for each child under 17 who qualified. For 2018, that deduction has doubled to $2,000 per qualifying child.
The child tax credit was nonrefundable before the TCJA. Now, the refundable portion is equal to 15% of your earned income over $2,500, up to $1,400. To estimate how much of the refund you would receive, you can use the following equation:
(Your salary - $2,500) x .15
Child Tax Credit Test
The child must be under age 17. More precisely, your child must have been 16 years or younger on the last day of 2018.
The child must be related to you. This includes your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, your grandchild, niece or nephew, or legally adopted child.
You must claim the child as a dependent on your federal tax return.
The child must be a U.S. Citizen, U.S. National, or a U.S. resident alien with an SSN.
The child must have lived with you for more than half of the tax year. Note: there are exceptions to the residency test, such as absences related to school, vacation, military service, and medical care.
The child must not provide more than half of his or her own support.
The new child tax credit eventually phases out for married taxpayers filing jointly with an income of $400,000 ($200,000 for all other taxpayers).
2) A $500 Credit for Dependents Age 17-24
If your child does not qualify for the CTC because they are over 17, they may still be eligible for a $500 credit under the new TCJA. The credit also applies for dependents who are elderly or disabled.
3) Changes to the personal exemption and standard deduction
If you filed your taxes in 2018, you should have received a personal exemption of $4,050 for yourself and each of your dependents. Your personal exemption was subtracted from your taxable income in addition to your standard or itemized deductions.
4) Restrictions to homeowner deductions
Homeowners especially will feel the effects of the new tax rules. If your family bought a home in 2018, you might be considering itemizing your deductions. In that case, be aware that under the new tax laws, the amount you can deduct for SALT is now capped at $10,000. There are also limits to how much you can deduct for home mortgage interest and home equity loan interest.
Come see us to learn more about tax changes and let us get you the maximum refund you are entitled to.
Kenneth P. Rapoport CPA, Ltd. is a full-service Tax / accounting firm dedicated to helping individuals and businesses conform to all aspects of income tax compliance. We will help you reduce your tax liability to the lowest amount legally possible! Do you have a complicated tax issue, need a tax extension or have have unpaid back taxes? We are here to help you with all your accounting or tax needs.
Tax season is here, let us help you get the maximum refund!
If you know anyone who would benefit from our tax services. As a thank you for each new paying client you send to us for their tax or accounting needs, we will reward you with a $25 Starbucks gift card. We appreciate you thinking about us throughout the year.
Regards,
Kenneth P. Rapoport, Certified Public Accountant
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