Tax Reform Tax Tip 2018-127, August 16, 2018
Taxpayers who have children and other dependents should use the Withholding Calculator on IRS.gov to perform a “paycheck checkup.” The Tax Cuts and Jobs Act, which was passed late last year, includes changes that will affect 2018 tax returns that people will file in 2019.
Doing a checkup ASAP will help taxpayers determine if they need to adjust their withholding on their paychecks. The earlier they do this, the better. The sooner someone checks it, the more time there is for withholding to take place evenly during the rest of the year. Waiting until later in the year means there are fewer pay periods to make the tax changes.
The new law made changes to the child tax credit and personal exemptions. Taxpayers should do a “paycheck checkup” to determine if the tax law changes could affect their tax situation this year. Here is an overview of the changes to the law that could affect the withholding of parents and caretakers:
Child tax credit
- The maximum child tax credit increased from $1,000 to $2,000 per qualifying child.
- Taxpayers whose income was too high to benefit from the Child Tax Credit in prior years may now find they qualify.
- The credit now phases out at $400,000 for couples and $200,000 for singles, compared with 2017 amounts of $110,000 for couples and $75,000 for singles.
Additional child tax credit
- The maximum additional child tax credit increased from $1,000 to $1,400.
- The ACTC is a refundable credit for taxpayers who owe little or no federal income tax.
Credit for other dependents
- There’s a new $500 credit that can benefit taxpayers who support other dependents.
- The taxpayer will claim the credit when filing a tax return.
- For purposes of this new credit, other dependents include qualifying children or qualifying relatives, such as a college student or an elderly parent.
- The new law removes the personal exemption that taxpayers formerly claimed for themself, their spouse and dependents.
The Withholding Calculator allows taxpayers to enter their expected 2018 income, deductions, adjustments and credits – including the child tax credit. Users can click on definitions in the calculator for help in figuring out who qualifies for these expanded credits.
For information about how to use the calculator and how to change withholding, taxpayer can check out the IRS Tax Reform Tax Tips on IRS.gov.
Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state's department of revenue to learn more.