Claiming Dependents? Here’s How to Boost Your Refund This Yeartax tips | January 24, 2019 | By Susannah McQuitty
The Tax Cuts and Jobs Act of 2017 shook up the credits, deductions and exemptions for most people’s returns, and families are in for some big changes as far as tax breaks are concerned. Taxpayers with dependents will notice a significant shift in where their tax breaks come from, and many, but not all, should see an improvement in their tax savings overall.
So what’s the shakeup? Let’s take a closer look at tax breaks for filers with dependents.
A bolstered standard deduction minus the personal exemption
One of the biggest changes has to do with the automatic personal exemption, which was removed with tax reform. In the past, each member of the family had an exemption just for being listed on the tax return—taking a whopping $4,150 off the filer’s taxable income.
Now, the standard deduction amount for every filing status is almost doubled to make up for the missing exemption. While the standard deduction only applies to each filer instead of each person, the savings should shake out to about the same amount for smaller families.
A side note: If you typically itemize deductions instead of taking the standard, you can still choose to do so if you’ll save more money that way—but most people won’t have to itemize to save money due to the larger standard deduction. See our Tax Reform 101 section in the Tax Guide for more info.
What about big families who counted on multiple exemptions? Well, there’s still good news: You’ll get some enhanced tax breaks from that boosted standard deduction and the new Child Tax Credit rates.
Higher amounts for the Child Tax Credit (CTC)
Any qualifying child dependents will boost a filer’s tax breaks too, since the credit amount per child is doubling from $1,000 to $2,000. It gets better: $1,400 of that amount will be refundable, so if your tax liability is reduced to zero, you could still get up to $1,400 of the credit.
The credit will also be available to many additional households on 2018 tax returns due to the significant increase in the phaseout thresholds. For married taxpayers filing jointly, the phaseout doesn’t kick in until adjusted gross income (AGI) hits $400,000, up drastically from $110,000 in the prior year. All other taxpayers will see their max qualifying AGI jump from $75,000 to $200,000.
Have dependents who aren’t children, like parents or extended family? You may qualify for a temporary $500 nonrefundable credit for adult or unrelated dependents, appropriately named the Credit for Other Dependents.
File with 1040.com for 100% accurate calculations
If you feel a bit dizzy reading about all the tax break changes, don’t worry: When you file with 1040.com, we’ll just ask you simple questions and use your answers to calculate your savings. No need to juggle the new tax breaks—we’ll do that in the background when you file your tax return.