New Child and Dependent Credits

At the end of the year, the overhaul doubled the maximum from $1,000 to $2,000 for each child in a family under the age of 17. This credit is also eligible for many more families. For 2018, it begins to phase out at $400,000 of adjusted gross income for most couples and $200,000 for most individuals, compared to $110,000 for couples in 2017 and $75,000 for single individuals. Low and moderate earners may be eligible for a credit payment of up to $1,400 per child, even if they do not owe a tax on income. The credit changes expire after 2025.

Credit and income levels are not adjusted for inflation, but the payment to lower earners of up to $1,400 per child is rarely adjusted in the coming years. The expanded credit will be a more valuable benefit for many filers with children under the age of 17 than the personal exemption suspended by the overhaul. A credit is a dollar-for-dollar tax offset, while the personal exemption was a deduction for higher earners from income. For 2017, each household member was $4,050.

Families with 17-year-old dependents, such as college students or an elderly parent, are often less well off after the overhaul. The tax credit for each of these dependents falls to $500, so the personal exemption would have provided more benefits in many cases. The new provisions do not change the existing rules of the tax code that define who is a dependent.