Many families have been impacted by the new tax law changes and may be wondering if there are any deductions and/or credits that still apply to them. Below is a list that you may want to discuss with your accountant or CPA completing your taxes for 2018; they include the Child Tax Credit, the Child and Dependent Care Tax Credit, the Adoption Credit and the Earned Income Credit.
The Child Tax Credit allows you to get up to $2,000 per child and $500 for a non-child dependent. In 2018, the credit starts to phase out when adjusted gross income for single filers reaches $200,000 and $400,000 for joint filers.
The Child and Dependent Care Tax Credit can be used if you are paying someone to take care of your children or another person in your household while you work. This credit “gives back” a portion of the money you spend on care, and can reduce your tax bill by hundreds or even thousands of dollars. Generally, the credit is 20-35% of up to $3,000 of daycare and similar costs for a child under 13, or an incapacitated spouse or parent, or another dependent so you can work, and up to $6,000 of expenses for two or more dependents. The percentage is income-based so families with an adjusted gross income of $15,000 or less they can get a credit of 35% of their expenses, but that shrinks by one percentage point for every extra $2,000 of income. Also, payments made out to a dependent-care flexible spending account or other tax-advantaged programs at work may reduce your credit.
For the tax year 2018, the Adoption Credit covers up to $13,840 in adoption costs per child. The credit begins to phase out at $207,580 of modified adjusted gross income and unfortunately, people with adjusted gross incomes higher than $247,580 do not qualify at all of this credit. Also, you cannot take this credit if you are adopting your spouse’s child. People adopting a special-needs child can get up to the full tax credit even if their actual expenses were less.
The Earned Income Tax Credit (EITC) is designed to supplement wages for low-to-moderate income workers. This credit also applies to tens of millions of individuals and families previously classified as “middle class”. The exact refund you receive depends on your income, marital status, and family size. To get a refund from the EITC you must file a tax return, even if you do not owe any taxes. If you were eligible to claim this credit in the past but didn’t you can still file any time during the year to claim an EITC refund for up to three previous tax years. Many filers miss out on this tax credit because the rules can be complicated and many just don’t know that they qualify.
Again, work with your accountant or CPA preparing your tax returnyour accountant or CPA preparing your tax return to ensure you get the most out of the deductions and credits that apply to your financial situation.