Axley & Rode, LLP

If you’re a parent, or if you’re planning on having children, you know that it’s expensive to pay for their food, clothes, activities and education. Fortunately, there’s a tax credit available for taxpayers with children under the age of 17, as well as a dependent credit for older children. Recent tax law changes Changes made by the Tax Cuts and Jobs Act (TCJA) make the child tax credit more valuable and allow more taxpayers to be able to benefit from it. These changes apply through 2025. Prior law: Before the TCJA kicked in for the 2018 tax year, the child tax credit was $1,000 per qualifying child. But it was reduced for married couples filing jointly by $50 for every $1,000 (or part of $1,000) by which their adjusted gross income (AGI) exceeded $110,000 ($75,000 for unmarried taxpayers). To the extent the $1,000-per-child credit exceeded a taxpayer’s tax liability, it resulted in a refund up to 15% of earned income (wages or net self-employment income) above $3,000. For taxpayers wi...

If you have dependents who don’t qualify for the child tax credit, you may be able to claim a different credit for other dependents. The maximum credit is $500 for each dependent who is age 17 or older and has an individual taxpayer identification number. The person can be a dependent parent or other qualifying relative supported by you, or an unrelated dependent living with you. Among other requirements, you can claim this credit if you claim the person as a dependent on your return. For more information about the credit, read IRS “Publication 972, Child Tax Credit and Credit for Other Dependents:”  https://bit.ly/2I2vj9O.

The U.S. Tax Court ruled that taxpayers without parental rights to their children are unable to claim tax breaks for them. The children lived full-time with an aunt, who adopted them and provided primary financial support. The court ruled that the parents didn’t qualify for the child tax credit and other tax breaks because their children didn’t qualify as dependents for the tax year in question. And since they lived with the aunt, the “same-principal-place-of-abode” requirement wasn’t met. (TC Memo 2018-12)