The Credit for Other Dependents (Formerly Family Tax Credit)

November 08, 2018 : Jackie Perlman

As with many Tax Cuts and Jobs Act changes, taxpayers are learning certain provisions available to them in the past have been modified or eliminated, but new provisions have been created giving taxpayers different options to reduce their taxable income or tax liability. Such is the case with the credit for other dependents.

You may have heard of this credit as the family tax credit. That was the name of an earlier version of the bill that was in the House, but the final version of the bill called it the “non-child credit.” In some cases, the credit has been referred to as the other dependent credit.  Because the 1040 references this as the credit for other dependents, we will use this term vs. the other dependent credit or the family tax credit.

Before Tax Reform: What a Family Could Claim on Taxes

Under pre-TCJA law, a taxpayer (and spouse, if married and filing jointly) could claim a personal exemption. Exemptions reduce a taxpayer’s gross income and the taxes he or she will owe. The taxpayer could also claim a dependent exemption for each dependent claimed on his or her tax return.

For 2017 tax returns, each personal exemption reduced gross income by $4,050. The exemption amount phased out (decreased) for taxpayers with Adjusted Gross Income (AGI) of $261,500 to $384,000 ($313,800 to $436,300 for joint filers).

The TCJA eliminates personal and dependent exemptions for tax years 2018 through 2025 but introduces a new type of credit available to taxpayers who have dependents.

What Is the Credit for Other Dependents?

The credit for other dependents is a new $500 personal tax credit:

  • The credit is worth $500 for each qualifying dependent.
  • The credit is nonrefundable. It is claimed on line 12 of the 2018 Form 1040.
  • Phaseout begins for taxpayers with AGI of $200,000 ($400,000 for joint filers). This phaseout applies in combination with the new child tax credit.
  • Unlike the child tax credit, the dependent does not require a valid SSN (a ITIN or ATIN will suffice) for the taxpayer to claim the credit for other dependents.

Impact of the Credit for Other Dependents

Although the TCJA eliminates the dependent exemption itself, it retains the definition of qualifying dependent to for the new credit for other dependents. Generally, these will be qualifying children who are past child tax credit age (i.e. 17 or older), or qualifying relatives, such as dependent parents, which may be why it had the earlier name of family tax credit. Dependents must meet specific tests to be treated as a qualifying child or qualifying relative for this and all other dependent-related tax benefits. The credit is also available for children who would otherwise qualify for the child tax credit but who do not have an SSN.

Note: although the dependent may have an ITIN or ATIN, the dependent must be a U.S. citizen or U.S. resident, such as a greencard holder. Non-citizen residents of Canada and Mexico do not qualify for the new credit. This is the same rule that applies to the child tax credit.

As with most provisions of the TCJA, the new credit for other dependents expires after December 31, 2025, unless extended by Congress.

Questions About Credits for Your Family Tax Situation?

To learn more about how your taxes may change this year, visit our Tax Reform Center.  For more information or for advice about the credit for other dependents, make an appointment with one of our tax professionals who can help you.

 

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Jackie Perlman

Jackie Perlman

Jackie Perlman is a principal tax research analyst within The Tax Institute at H&R Block.