There has been discussion whether the personal exemptions being removed and the increase in the standard deduction will be better or worse for taxpayers in 2018. Middle income taxpayers have been concerned as they may not have substantial itemized deductions to offset the loss of the dependent deductions despite the increased standard deduction.
My last son is 18 and has moved out of the house. Therefore, I will not be benefiting from the positive changes to the Child Tax Credit. However, taxpayers that have children in their household under 17 years of age will.
The child credit has doubled from $1,000. per child to $2,000. per child. This is a credit against your tax liability, after deductions, with a portion of the credit being refundable. Even if a taxpayer has no tax liability whatsoever, he or she can get back $1,400 for each qualifying child. The refundable portion of the credit is calculated by reducing adjusted gross income by $2,500. and then multiplying that figure by 15%.
Married Taxpayers can now take the credit with adjusted gross income of up to $400,000. This is a substantial change from the prior years threshold. The Child, however, must have a social security number or the credit will be disallowed. If you do not have time to take care of that right away after the baby is born, then be sure to file an extension. Once you receive the social security number for the new baby you can then file the tax return on extension in 2019 and relish in the fact that he or she is already an income earner!