Parents will lose a big tax deduction under tax reform: the personal exemption. The change could affect taxpayers’ liability when they complete their 2018 federal income tax returns. Liberty Tax takes a look at the biggest changes for parents under the new tax law.
Personal and dependency exemptions. The Tax Cuts and Jobs Act repeals the tax deduction for personal and dependency exemptions for tax years 2018 through 2025. Before the new law was signed by President Trump, the personal exemption had been set to reach $4,150 for tax year 2018. For a family of four — two adults and two dependent children — that would have meant a deduction of $16,600.
Child tax credit. The child tax credit has doubled to $2,000 for each qualifying child with phaseouts for higher incomes. Taxpayers may also claim a new nonrefundable credit of $500 for each dependent who is not a qualifying child.
Qualified tuition programs. Under tax reform, Section 529 qualified tuition plans are modified to allow the plans to distribute up to $10,000 in tuition expenses incurred during the tax year for designated beneficiaries enrolled at a public, private, or religious elementary or secondary school. Disbursements from these plans used to be available only for qualified higher education expenses.
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