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Blogging Beyond the Numbers

The new and improved Dependent Credit means $500 for high school and college age kids
Posted by: Katy Mering 3 months ago

If you are a parent of a child age 17 to 23 and you pay over half of his or her living expenses you are eligible for the lower $500 other dependent credit. 

The Tax Cut and Jobs Act (TCJA) increased the child credit to $2000 per qualifying child under the age of 17.  The income phase out was substantially increased so more people qualify for it.  TCJA eliminated dependency for children for 2018 through 2025.  The new $500 tax credit was established for dependents who are not under age 17 who would otherwise qualify for the child credit.  However, there are certain tests that must be passed:

A qualifying dependent for purposes of the $500 credit includes:

  1. A dependent child who lives with you over half of the year and is over age 16 and up to age 23 if he or she is a student, and
  2. Other non-child dependent relatives (such as a grandchild, sibling, father, mother, grandparent and other relatives).

To be eligible for the $500 credit you provide over half of the person’s support for the year and he or she must be a US citizen, US resident, or US national.

Both the child tax credit and the dependent credit begin to phase out at $400,000 of modified adjusted gross income for married joint filers ($200,000 all others).

Individuals who aren’t relatives can also be a qualifying dependent if they meet the preceding requirements and live with you as a member of your household for the year.  In this case, a non-qualifying child has one additional hurdle to claim the $500 credit – the income test.   A dependent will pass the income test for the 2018 tax year if he or she has gross income of $4,150 or less. (The $4,150 amount will be adjusted for inflation in future years.)

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