In 2018, the Tax Cuts and Jobs Act went in to effect until 2025, and the new Family Tax Credit was created. This tax credit has several benefits for families. If your qualifying child is in school, for example, you may still take the tax deduction for them through the age of 23. It’s also a lot more inclusive, covering your extended family and older parents who may depend on you for support. Here’s a brief summary of what’s new and who will be covered through the Family Tax Act.
The credit covers all of your family
While the Child Tax Credit only covers dependents ages 16 and under, the Family Tax Credit extends this to your children up to the age of 18 or 23 if they are enrolled in school. The dependents can also be other family members aside from your children.
The Family Tax Credit was created for your entire family. Parents, grandparents, step-parents, siblings, uncles, aunts and in-laws are also covered. Adopted children were always covered as your own under the Child Tax credit previously.
The stipulations for qualifying
Under the credit, dependents may also earn an income and still qualify. This income must be roughly $4,000 or less to remain eligible, however. For you to claim the credit, there are also stipulations on how much you and your partner can earn in order to qualify. You may still receive the credit if your income is up to $400,000 if you and your spouse are married or filing jointly; for individuals, you can reviece the credit even if your income is up to $200,000.
In order to qualify, the dependents must also receive more than half of their financial support from you during the current tax year. Depending on who the dependent is, they might not have to live with you full-time to qualify. Your parents, for example, may be exempt if they live separately under your support. This also only applies if the dependent is a U.S. citizen, U.S. resident, or a U.S. national with a valid social security or tax identification number.
How much is the tax credit?
Under the Family Tax Credit, you’ll receive $500 per child for each dependent. This is a nonrefundable tax credit meaning it can only reduce or eliminate your tax bill.
The Family Tax Credit is subtracted from whatever you owe the IRS, but if there is anything left over you will not be mailed a check for the difference.