The child tax credit, or CTC, was worth up to $1,000 per qualifying child, refundable for taxpayers with earned income of at least $3,000, and phased out (decreased) for taxpayers with AGI above $75,000 ($110,000 for joint filers). These rules remain in effect for 2017 tax returns (filed in 2018).
Under the new Tax Cuts and Jobs Act (TCJA) the following child tax credit changes will take place in 2018:
The Child Tax Credit under 2018 tax reform is worth up to $2,000 per qualifying child. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit).
The refundable portion of the credit is limited to $1,400. This amount will be adjusted for inflation after 2018.
The earned income threshold for the refundable credit is lowered to $2,500.
The beginning credit phaseout for the CTC increases to $200,000 ($400,000 for joint filers). This will allow most families with children, whether married or single, to claim the credit, as the phaseout was significantly enlarged.
The child must have a valid SSN to claim the nonrefundable and refundable credit.
Prior to the TCJA, the taxpayer who was eligible to claim the child’s dependent exemption was also the one eligible to claim the CTC. In turn, the taxpayer and child had to meet several “tests” for the one to be considered the dependent of the other.
The TCJA eliminates the dependent exemption itself, but retains the definition of dependent to claim the CTC and other child- or dependent-related tax benefits. For Child Tax Credit reform purposes, this will usually mean that the child must be related to the taxpayer in one of several ways (son, daughter, grandchild, etc.), must live in the taxpayer’s home more than half the year, and must not provide more than half of his or her own support. Special rules apply if the parents are divorced or legally separated.