Your kids could be key to tax breaks, and maybe a bigger refund

When you're trying to get the biggest tax refund possible, don't forget the kids.

Sure, parents can grumble every day about how much they're spending on everything from diapers for newborns to hockey lessons for grade-school athletes. But the closer you get to April 15, well, the more you love packing school lunches. 

"People know that having children helps their taxes," said Lynn Ebel, director of the Tax Institute at H&R Block.

Key changes for families took place in the Tax Cuts and Jobs Act of 2017. Even so, many tax breaks relating to children and education remain in place on the 1040 form for 2018. And some breaks are even are better than what was allowed earlier. 

Here are some answers to questions parents may have about their tax situation : 

What kind of tax breaks apply to children?

The 2018 tax return includes an increased Child Tax Credit, as well as a new $500 nonrefundable credit for other dependents. 

This is good news for many families, even those with higher incomes. 

Taxpayers who qualify can claim up to $2,000 — instead of $1,000 — for children who are under age 17 as of Dec. 31. The child must be claimed as a dependent on your tax return. The child also must have a valid Social Security number. 

More families can claim the Child Tax Credit now that higher income limits were put in place as part of the Trump tax package. 

The income threshold jumps all the way to $400,000 for married filing jointly and $200,000 for others before any phaseout. 

Under the old tax law, the adjusted income limits were far lower: $75,000 for singles; $110,000 if married filing jointly. 

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Another plus: The Additional Child Tax Credit, now worth up to $1,400 per qualifying child, is available as a refundable credit for those with earned income of more than $2,500. As a result, some struggling families can get refunds even if their taxes are zero. The credit is based on earned income. 

What if your children were 17 or older in 2018? 

A new credit, often called the Credit for Other Dependents, offers $500 for each qualifying child or other dependent relatives, such as older relatives in your household, if they do not qualify for the child tax credit. 

For this new credit, the dependent does not need a valid Social Security number. An Individual Taxpayer Identification Number or Adoption Taxpayer Identification Number would work.

What exactly is a dependent? 

Keep in mind that the basic rules for claiming a dependent still apply, even though the personal tax exemption was eliminated under the Tax Cuts and Jobs Act and the amount itself now is zero, said Marshall Hunt, a certified public accountant and director of tax policy for the Accounting Aid Society's tax assistance program in metro Detroit.

So if you're claiming credits, such as the Earned Income Tax Credit, you need to be careful about who is a dependent and who isn't. 

A good example is a full-time college student age 19 or over but under 24.

Hunt said if a college-age child stays in school they can be a viewed as a qualifying child on the parent's return for the Earned Income Tax Credit and the credit for other dependents, even if the student is working.

There is no gross income limit as long as the student doesn't provide more than half of his or her own support. 

"However, if they don’t stay as a full-time student for any part of five months or are disabled, they will not be a qualifying child for the EITC," Hunt said.

"And, if they make $4,150 or more, they will also not be a dependent qualifying for the credit for other dependents."  

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Did you lose a tax break for children?

Maybe — if your kids are older. 

"Most families will be impacted by the loss of the personal exemption," H&R Block's Ebel said.

Under the tax overhaul, personal exemptions are no longer used or allowed. On last year's tax return, a personal exemption was $4,050 per person. 

"And this year, that's zero," Ebel said. "Obviously, if you have any dependents that's going to impact you." 

The higher $2,000 Child Tax Credit — which reduces your tax bill dollar-for-dollar — can be a help if your children were under age 17 as of Dec. 31. The new $500 is some help for older children but it's not as good as the $2,000 credit for younger children.

Ebel said some families may want to adjust their W-4 at work to withhold more for taxes if their children turn 17 this year.

Remember, you need to look at the age of your child on the very last day of the year. If the child is 17 or older then, you no longer qualify for the $2,000 credit.   

Can you get some relief from daycare bills?

Yes, if you dig into the rules for the Child and Dependent Care Credit. 

Remember, though, your dependent qualifying child must be under age 13 when the care is provided. 

The total expenses that you may use to calculate the credit may not be more than $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals.

If you use a flexible spending account at work, though, you're not going to be able to claim what you spent out of that account. So if you saved $1,000 in the account and used that money toward daycare expenses, you could calculate the dependent care credit on up to $2,000 in expenses for one child. 

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What kind of breaks can you get for college? 

The American Opportunity Tax Credit — which offers up to $2,500 per student for payment of qualified education expenses, including tuition and books, for the first four years of higher education — remains in place. Also: 40% of the credit (up to $1,000) is refundable. This means you can get it even if you owe no tax.

Among other requirements, the student must be enrolled at least half time for at least one academic period beginning in 2018. And the student may not have finished the first four years of higher education at the beginning of 2018. 

Taxpayers will receive a tax credit based on 100% of the first $2,000, plus 25% of the next $2,000, paid during the taxable year for tuition, fees and course materials.

The Lifetime Learning Credit remains in place, too, offering a way to help pay for undergraduate, graduate and professional degree courses, as well as study to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

But the one solid tax break did come to an end in 2017 and, as a result, the status of the tuition and fees deduction remained up in the air as of early April. It's possible that at some point it might apply to 2018 and then again, it might never come back to life. 

Previously, it was possible to reduce the amount of your income subject to tax by up to $4,000. Again, though, this deduction would need to be extended by Congress to cover 2018 expenses.

The deduction had previously been reported on Form 8917, but that form wasn't revised earlier in the tax season because the tax break had expired in 2017.

What's key here is you do not need to itemize to claim this deduction. Keep an eye out for any such news about extenders — and talk with your tax professional about filing an amended return if necessary. See www.irs.gov/extenders for more information going forward. 

ContactSusan Tompor at313-222-8876 or stompor@freepress.com. Follow her on Twitter@tompor. Read more on business and sign up for our business newsletter.