More Taxpayers Will Qualify For The Child Tax Credit

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There is great news for parents in the middle to upper income tax brackets.  The new tax law dramatically increased the income phase-out threshold for claiming the child tax credit.  In 2017, parents were eligible for a $1,000 tax credit for each child under the age of 17 as long as their adjusted gross income (“AGI”) was below $75,000 for single filers and $110,000 for married couples filing a joint return.  If your AGI was above those amounts, the $1,000 credit was reduced by $50 for every $1,000 of income above those thresholds.    In other words, the child tax credit completely phased out for a single filer with an AGI greater than $95,000 and for a married couple with an AGI greater than $130,000. 

Note:  If you are not sure what the amount of your AGI is, it’s the bottom line on the first page of your tax return (Form 1040). 

New Phaseout Thresholds Beginning In 2018

Starting in 2018 and for years going forward, the new phaseout thresholds for the Child Tax Credit begin at the following AGI levels:

Single Filer: $200,000

Married Filing Joint: $400,000

If your AGI falls below these thresholds, you are eligible for the full Child Tax Credit.  For taxpayers with an AGI amount that exceeds these thresholds, the phaseout calculation is the same as 2017.  The credit is reduced by $50 for every $1,000 in income over the AGI threshold.

Wait......It Gets Better

Not only will more families now qualify for the child tax credit but the amount of the credit was doubled.  The new tax law increased the credit from $1,000 to $2,000 for each child under the age of 17.

In 2025, a married couple, with three children, with an AGI of $200,000, would have received nothing for the child tax credit.  Now, that same family will receive a $6,000 tax credit. That’s huge!! Remember,  “tax credits” are more valuable than “tax deductions”.  Tax credits reduce your tax liability dollar for dollar whereas tax deductions just reduce the amount of your income subject to taxation.

This information is for educational purposes only.  Please consult your accountant for personal tax advice.  

 

Michael Ruger

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

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