families with children
Families With Children
Mid America Tax Planner
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Child Tax Credit
Maximum credit: $2,000 per qualifying child.
Adjusted Gross Income (AGI) Phaseout
The credit is reduced by $50 for each $1,000 of modified
AGI above:
• $400,000 Married Filing Jointly.
• $200,000 Single, Head of Household, Qualifying
Widow(er), or Married Filing Separately.
The regular child tax credit is nonrefundable, but if anypart of the credit is disallowed because tax is reduced to
zero, the taxpayer may qualify for the Additional ChildTax Credit, which is refundable.
Family Tax Credit
Maximum credit: $500 per qualifying dependent.
A nonrefundable credit of up to $500 is allowed for dependents
other than a qualifying child for the Child Tax
Credit.
Additional Child Tax Credit
Up to $1,400 of the Child Tax Credit is refundable. Taxpayersmay be able to claim the additional credit if a portionof the regular Child Tax Credit was disallowed becausetax was reduced to zero before the entire credit was used.
The portion of the Child Tax Credit phased out becauseof AGI cannot be used to claim the additional credit.
Child and Dependent Care Credit
Credit
The credit is 20% – 35% of the smallest of:
Families
With Children
Earned Income Credit (EIC)
The EIC is a refundable credit for low-income earners.Taxpayers with investment income of more than $3,500
Do not qualify.
Requirements for Everyone
The following requirements must be met whether ornot the taxpayer has qualifying children.
• Valid Social Security Numbers. Taxpayer and spouse(if filing jointly) must have valid Social Security Numbers.
Qualifying children must also have valid SocialSecurity Numbers except a child who was born and
died during the year. Adoption and individual taxpayeridentification numbers (ATINs and ITINs) do not
qualify. A Social Security Number on a card that reads“Not Valid for Employment” does not qualify. A Social
Security Number on a card that reads “Valid for workonly with DHS (or INS) authorization” qualifies.
• The taxpayer must be a U.S. citizen or resident alien
for the entire year. A nonresident alien can claim thecredit if married to a U.S. citizen or resident alien, and
the nonresident alien chooses to be treated as a residentfor the entire tax year by filing a joint return.
• Filing status may not be Married Filing Separately.
• The taxpayer may not be a qualifying child of
another taxpayer.
• The taxpayer may not file a tax form relating to
foreign earned income.
• The taxpayer’s investment income must be $3,500
or less.
Taxpayers Without Qualifying Children
Taxpayers who meet all the requirements and who donot have a qualifying child for the year, can claim EIC if
the following additional requirements are met • The taxpayer must be at least 25, but under age 65,
at the end of 2018.
If Married Filing Jointly, either taxpayer can meet the
age test.
• The taxpayer cannot be the dependent of another
person.
• The taxpayer’s principal place of abode is in the
United States for more than half the year. Residence
• $3,000 ($6,000 for two or more qualifying persons).
• Qualified expenses incurred and paid during the year.
• Include expenses for care in 2018 that were paid before
2018. Reduce expenses by dependent care benefits excluded
from income.
• Taxpayer’s earned income.
• Spouse’s earned income.
Exclusion
Instead of taking the credit, taxpayers may be eligibleto exclude from income an amount up to $5,000 for dependentcare benefits received under an employer plan
Child and Dependent Care Expenses
Qualified
Not Qualified
• Care outside the taxpayer’s home for
a qualifying person who regularly
spends at least eight hours each day
in the taxpayer’s home.
• Amounts paid for items other than
care (food and schooling) if they are
incidental to the care and cannot be
separated from the total cost.
• Before and after school care.
• Household services, including cooks,
maids, babysitters, or cleaners, if
services were partly for the care of a
qualifying person.
• Employment taxes, meals, and extra
lodging expenses for household
employees.
• Day camps and similar programs
even if they specialize in a particular
activity.
• Transportation provided by a
childcare provider to or from a place
that care is provided.
• Schooling for a child in kindergarten
or above. Clarification:
The IRS has confirmed that kindergarten
costs are educational
and do not qualify for the credit.
This includes costs paid for a full
day of kindergarten at a private
school in a district where public
schools have half-day classes.
Costs of pre-school do qualify
even if the programs have some
educational content.
• Cost of an overnight camp.
• Expenses reimbursed by a
state social service agency not
included in income.
• Child support payments.
• Transportation of the care
provider and transportation of a
qualifying person not provided by
a childcare provider
Adoption Credit
Credit and Exclusion Amount
A taxpayer can claim a credit of up to $13,810 (2018) and
also exclude up to $13,810 of employer-provided benefitsfrom income for expenses of adopting an eligible
child. The same qualifying expenses cannot be usedfor both. Limits apply to the total spent over all years
for each effort to adopt an eligible child. An attemptthat leads to adoption and any unsuccessful attempt to
adopt a different child is treated as one effort. Unmarriedpersons who adopt a child can divide each limit in any way they agree.
Qualified Expenses include Non Qualified Expenses include Expenses
• Adoption fees.
• Attorney fees.
• Court costs.
• Travel expenses, meals and
lodging, while away from home.
• Re-adoption in state court
• To adopt a spouse’s child.
• For surrogate parenting.
• Paid or reimbursed by employer,
governmental agency or other.
• Allowed as a credit or deduction
under another tax provision.
• Paid before 1997
Eligible Child
A child under age 18 or a person who is disabled physicallyor mentally incapable of self care.
Education Credits
American Opportunity Credit. Credit of up to $2,500per student for the first four years. 40% of the credit may
be refundable.Lifetime Learning Credit. Credit of 20% of the first$10,000 of qualified education expenses (maximum credit
is $2,000). No limit on the number of years the credit may be claimed.
Contact Us
There are many events that occur during the year that can affect
your tax situation. Preparation of your tax return involves summarizing
transactions and events that occurred during the prior
year. In most situations, treatment is firmly established at the
time the transaction occurs. However, negative tax effects can
be avoided by proper planning. Please contact us in advance
if you have questions about the tax effects of a transaction or
event, including the following:
• Pension or IRA distributions.
• Significant change in income or
deductions.
• Job change.
• Marriage.
• Attainment of age 59½ or 70½.
• Sale or purchase of a business.
• Sale or purchase of a residence
or other real estate.
• Retirement.
• Notice from IRS or other
revenue department.
• Divorce or separation.
• Self-employment.
• Charitable contributions
of property in excess of
$5,000
