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Changes to Tax Credits Create Opportunities

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Recent changes to the tax law has resulted in two new credits, the Child Tax Credit and the Credit for Other Dependents. Because these changes can result in refunds for the tax filer, we are bringing these to your attention. We have provided the requirements and guidelines for you here:

The Child Tax Credit

Beginning with tax year 2018 and through tax year 2025, taxpayers may be able to claim Child Tax Credit if they have a qualifying child under the age of 17.

It is important to note that part of this credit can be refundable, so it may give a taxpayer a refund even if they do not owe any tax.

The taxpayer’s qualifying child must have a Social Security number issued by the Social Security Administration before the due date of the tax return, including filing extensions. 

The Credit for Other Dependents

The second tax credit we want to introduce is the Credit for Other Dependents (ODC). This is a new nonrefundable credit that was introduced with the Tax Cuts and Jobs Act of 2017 (TCJA).  Dependents who cannot be claimed for the Child Tax Credit (described above) may still qualify for the Credit for Other Dependents.

Unlike the child tax credit, this is a non-refundable tax credit of up to $500 per qualifying person. The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien.

In another departure from the child tax credit, a dependent who does not have the required Social Security number, may still be eligible to be claimed for the (ODC).

Here is some data that will help you make a decision regarding qualifying for these credits.  The important numbers to know before claiming the child tax credit or the credit for other dependents include:

  • The maximum amount of the child tax credit per qualifying child is $2,000.
  • The maximum amount of the child tax credit per qualifying child that can be refunded even if the taxpayer owes no tax is $1,400.
  • The maximum amount of the credit for other dependent who is not eligible to be claimed for the child tax credit is $500 for each qualifying dependent. This can include dependents over the age of 16 and dependents who do not have the required SSN.
  • Child tax credit begins to decrease in value if taxpayer’s gross income exceed $200,000 ($400,000 for Married Filing Jointly).

As always, if you have questions specifically regarding these tax credits or any tax concerns, please feel free to contact Mariana Moghadam at 973-994-9494 or by email at Marianne.moghadam@sobelcollc.com