The Child Tax Credit (CTC) was one of many items touched by the sweeping tax reform coming into effect for the 2018 tax year. In addition to the amount of the credit increasing, the threshold for qualifying for the credit has improved, resulting in more taxpayers being able to benefit from it.
In order to receive the credit, you need to first determine if your kids will qualify. A child must be under age 17 at the end of the tax year and they must be your own child, stepchild or foster child place with you by a court or authorized agency (an adopted child is always treated as your own.)
You can claim your brother or sister, stepbrother, and/or stepsister as well as the descendants of any of these qualifying people if they meet all other requirements.
The child cannot have provided more than half of their own financial support during the tax year and must be claimed as a dependent on your tax return. The child must be a US citizen, a US national or a US resident alien.
The child must have lived with you for more than half of the tax year. Temporary absences either by you or the child for special circumstances like school, vacation, business, medical care, and military services are counted as time the child lived with you.
The child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions) to be claimed as a qualifying child. This is new for the 2018 tax year!
In 2017, the phase out threshold was $55,000 for married filing separate; $75,000 for single and head of household; and $110,000 for married filing jointly taxpayers. Under the new tax law, phaseout of the credit begins at $200,000 or $400,000 for married filing jointly tax payers. The credit has also doubled from $1,000 for each qualified child to $2,000 per child.
The CTC was previously nonrefundable, meaning that if your tax liability was zero, any remaining credit from the CTC was lost. For tax year 2018, there is a refundable amount of up to $1,400 per qualifying child.
Since the personal exemption is suspended in 2018, the changes to the Child Tax Credit (and the standard deduction) may help offset some of the deductions that were lost.