With President Trump's new tax law, the child tax credit was raised from $1,000 to $2,000 per child for 2018 and 2019. Having qualified dependent children may also allow you to claim other significant tax credits, including the earned income credit (EIC). Together, the tax savings can be significant for many American families.
However, at higher income levels, the child tax credit is phased out and begins to disappear as income rises above $400,000 on joint returns, and above $200,000 on single and head of household returns. Up to $1,400 of the 2018 credit is refundable, meaning that if it exceeds your income tax liability for the year, the IRS will issue a refund check for the difference. If you didn’t qualify in prior years, it's important to recheck you eligibility each passing year.
How a Child Qualifies as a Dependent
When filing for 2018 or 2019, a child can qualify as a dependent if all the following is true:
- The child is your child by blood, adoption or marriage...or they are a stepchild, foster child, sibling, step-sibling, half-sibling, or a descendent of any of these relatives.
- The child lives with you for more than half the year, unless an exception applies. Exceptions include divorce or separation, kidnapping, and children who were born or died during the year.
- The child is younger than 19 at the end of the tax year or younger than 24 at the end of the tax year and going to school full-time during some part of at least five months of the year. If the child is permanently disabled at any time during the year, this rule doesn’t apply.
- The child didn’t provide more than half their own support.
- The child isn’t filing a joint tax return unless it’s only to claim a refund for taxes of income tax withheld or estimated payments they made to the IRS.
Taxes, Children and Divorce
If two taxpayers—such as divorced individuals—want to claim a qualifying child as a dependent in the same tax year, only one can do so. The one who gets to claim the child is the parent, or if both taxpayers are the child’s parents, the one with whom the child lived for the most time during the tax year...or if the child lived with both parents an equal amount of time during the year, the parent with the highest AGI can claim the child as a dependent.
If neither is the child’s parent, the taxpayer with the highest AGI can claim the child. However, it is possible a child could be claimed as a qualifying child by two taxpayers if one of them is not required to file an income tax return, and either doesn’t file one or files only to get a refund for income tax withheld or estimated tax they paid.
Earned Income Credit and Qualifying Child Criteria
A qualifying child cannot be used by more than one person to claim the Earned Income Tax Credit. In addition, the child must meet the relationship, age and residency tests. If you don't have a child, you (or your spouse if filing jointly) must be at least age 25, but under age 65...and you (and your spouse if filing jointly) cannot qualify as the dependent of another person. In addition, you (and your spouse if filing jointly) must have lived in the United States more than half the tax year.
Here's how much you can save per child with the EIC, along with income limitations:
A qualified dependent for tax purposes can be either a qualifying child or another qualifying relative (the child tax credit and EIC may not apply to other qualifying relatives). In order to qualify as a dependent, the child must either be a citizen or resident of the United States, or a resident of Canada or Mexico. In addition, you cannot claim someone as a dependent if he files his own tax form on which he takes a personal exemption for himself or on which he claims dependents. Anyone who is married and filing a joint return may not be claimed as a dependent. (For related reading, see: How to Claim a Dependent on Your Tax Return.)