Following the post-COVID stimulus hangover in 2022, the bull market has continued to run. One of the key factors was the Federal Reserve’s decision to
Child and Dependent Care Tax Credit
In a move that eases the pain of the repeal of the personal exemption, the child credit has doubled and is available to more families.
If you are a parent of children under the age of 17, the expansion of the child tax credit from $1,000 to $2,000 per child could provide valuable tax savings, possibly even more than the personal exemption of $4,150 did in the past. You may also be eligible for the first time as the credit now begins to phase-out at adjusted gross income (AGI) of $400,000 for joint filers and $200,000 for single filers. The tax code definition of dependents remains the same so make sure to check before claiming the credit.
Because a tax credit is a dollar for dollar reduction of taxes, this is more advantageous than a deduction, which simply reduces your taxable income. For example, a family earning $200,000 per year in 2018 with two elementary school aged children will save $4,000 in taxes or $2,000 per child. Claiming a personal exemption under prior law, they would have only saved about $1,100 per child.
If there are older dependents – either children over age 17 or elderly parents – the new picture isn’t so rosy. The tax credit is only $500 each for these dependents.
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