Included in the recently-passed Tax Cuts and Jobs Act (TCJA) were several implications pertinent to parents and children.
Let’s start with the bad news first.
- While there has been a lot of publicity over the increased standard deduction, the elimination of personal exemptions has not been mentioned. This was previously worth $4,050 per family member in 2017, although it did phase out for high income taxpayers.
But, all hope is not lost. Here is the good news.
- Generally speaking, tax rates are more favorable since all tax brackets have been lowered. This would mean that a family bringing home $200,000 is in the 24% tax bracket in 2018, down from 28% in 2017.
- Child tax credits are doubled from $1,000 to $2,000 per child and will apply to taxpayers with income up to $400,000.
- Kiddie tax, which applies to investment income of children under age 19 or full-time students, up to age 24, is more straightforward. Your child’s tax rate was previously dependent upon your tax rate. Starting in 2018, there are separate tax rate schedules for Kiddie tax returns. This will allow each child’s return to be completed without having to wait on completion of the parent’s return.
If you have questions on how the tax reform law will affect you, your family or your business please contact your Warren Averett Advisor.