March 5, 2021

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Friday, March 5, 2021

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Thursday, March 4, 2021

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Wednesday, March 3, 2021

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Wednesday, March 3, 2021

Child Tax Credit Holds Great Value

child care

If you’re a parent, or soon will be, you’re no doubt aware of how expensive it is to pay for food, clothes, activities, and education. Fortunately, the federal child tax credit is available to help many taxpayers with children younger than 17. Askey, Askey & Associates, CPA, LLC also helps taxpayers learn more about the dependent credit for those who are eligible with older children.

An expanded break

Before the Tax Cuts and Jobs Act (TCJA) kicked in, the child tax credit was $1,000 per qualifying child. But it was reduced for eligible married couples filing jointly by $50 for every $1,000 (or part of $1,000) by which their adjusted gross income (AGI) exceeded $110,000 ($75,000 for unmarried taxpayers).

Starting with the 2018 tax year, and applying through the 2025 tax year, the TCJA doubled the child tax credit to $2,000 per qualifying child under 17. It also created a $500 credit per dependent who isn’t a qualifying child under 17. There’s no age limit for the $500 credit, but IRS tests for dependency must be met.

The TCJA also substantially increased the thresholds at which the credit begins to phase out. Starting with the 2018 tax year, the total credit amount allowed to a married couple filing jointly is reduced by $50 for every $1,000 (or part of a $1,000) by which their AGI exceeds $400,000. The threshold is $200,000 for other taxpayers. So, many taxpayers who were once ineligible for the credit because their AGI was too high are now eligible to claim it.

SSN requirement

In order to claim the child tax credit for a qualifying child, you must include the child’s Social Security number (SSN) on your tax return. Under previous law, you could instead use an individual taxpayer identification number (ITIN) or adoption taxpayer identification number (ATIN).

If a qualifying child doesn’t have an SSN, you won’t be able to claim the $2,000 credit. However, you can claim the $500 dependent credit for that child using an ITIN or an ATIN. The SSN requirement doesn’t apply for non-qualifying-child dependents but, if there’s no SSN, you must provide an ITIN or ATIN for each dependent for whom you’re claiming a $500 credit.

Don’t miss out

The changes made by the TCJA generally increase the value of these credits and widen their availability to more taxpayers. Askey, Askey & Associates, CPA, LLC,  can provide  further information when preparing your tax return.

Askey, Askey & Associates, CPA, LLC, have two full-service offices located in Leonardtown, MD, at 23507 Hollywood Road, P.O. Box 662, Leonardtown, MD 20650, phone: 301-475-5671; and in La Plata, MD, at 105 Centennial Street, Suite D, La Plata, MD 20646, phone: 301-934-5780

For more about Askey, Askey & Associates, CPA, LLC, visit their Leader Member Page, Facebook or LinkedIn.

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