The new Republican tax plan was jammed through Congress at record speed last week, and many citizens (and even some Senators, maybe) don't fully understand what it entails, other than big breaks for corporations and billionaires. How will it affect the average taxpayer? Will filing be more difficult? Who can expect a bigger refund? And will claiming dependents change under the new tax bill? Depending on your filing status and how many kids you have, you could be losing out on some deductions you've become accustomed to.
The new tax bill doubles the child tax credit to $2,000, according to the The Washington Post, and it expands the standard deduction to $12,000 for individuals and $24,000 for married couples (the old standard deductions were $6,350 for individuals and $12,700 for married couples, according to Business Insider). That sounds great! But it's actually offset by the elimination of exemptions. Previously, filers could claim one exemption each for themselves, their spouse, and a child exemption for each child up to age 19, or up to 24 if the child is a college student. Under the new plan, there are no longer any exemptions, and in most cases, that means that more of parents' income will be taxable than before.
There are, of course, other variables, such as the amount of your total income, and any other deductions you might be taking, but for many taxpayers, the standard deduction is the easiest way to file, especially if you're not in a position to pay for tax preparation. Even for those who do have their taxes prepared by a professional, itemizing doesn't always lead to a higher deduction. That might change for their 2018 taxes, however.
The personal exemption was $4,050 per person, and the old child tax credit was $1,000 per kid, according to CNN Money, meaning each kid knocked $4,050 off of your taxable income, in addition to yourself — and your spouse if applicable. In most cases, the higher standard deduction and child tax credits don't make up for that loss. Under the old plan, the first $25,850 of income for a married couple with one child under 17 was non-taxable, and that amount goes up to $28,000 in 2018. But the new plan expires in 2025, and even so, that's the only family configuration that benefits from the new deductions.
According to my calculations, couples with two kids will see their non-taxable income drop from $30,900 to $30,000, and couples with three kids will see their non-taxable income go from 35,950 to $32,000, and those gaps grow exponentially for each child added to a family. A married couple with five kids will see a deduction loss of more than $10,000 per year, for example. Things are even worse for single parents, whose non-taxable income will drop from $15,450 to $14,000 if they have one child. Single parents with five kids, who deserve every break in the world, will go from a $36,050 deduction to just $22,000.
And it's even worse if those kids are older. As previously stated, the child tax credit used to be applicable to teens and college students well into their 20s, but the new, higher one of $2,000 is only available for kids up to age 16, because they're expected to be pulling themselves up by their bootstraps by that time, I guess. If you're lazy, good-for-nothing high school junior isn't pulling their own weight, or your 22-year-old is blowing all your cash on ramen while working towards their degree, there is a new "non-child dependent" tax credit available, according to the Chicago Tribune: a whopping $500. Speaker of the House Paul Ryan wants us to have more babies, but his party never said they would make it more affordable.
Note: A previous version of this story misstated the personal exemption amount. It has been updated to properly reflect the accurate amount.
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