Updated on: December 09, 2022
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Many of the changes to the tax code from the recently passed Tax Cuts and Jobs Act (TCJA) are taking effect in 2018 – which could impact your finances in a big way. Maybe you’ve already noticed a change in your take-home pay, or maybe you’ve heard about how the standard deduction has nearly doubled. The TCJA is the biggest change to the American tax code in 30 years – and its purpose is to benefit the majority of hardworking Americans.
But what changes can make your taxes go up? Here’s a quick look at how your taxes may be affected by the change to the special COVID provisions.
The changes to the Child Tax Credit and the Additional Child Tax Credit can definitely reduce your refund. The credit reverted to 2020 rules and the credit is again $2,000 per child 16 and under (was 17 and under and $3,000 or $3,600 for children under 6), up to $1,500 of the credit is refundable instead of the full credit, and taxpayers again have to have earned income to get the credit.
There is also the change to the Child and Dependent Care Credit (the daycare credit) for children under 13 or anyone on the tax return unable to care for themselves while the taxpayer (both if a joint return) work. This credit is back down to allowing expenses of $3,000 for one person and $6,000 for more than one (was $8,000 and $16,000); the credit is nonrefundable (was fully refundable last year), and the percentage of expenses for the credit is back to 20% for most taxpayers (from 50%).
The Earned Income Tax Credit (EITC) for taxpayers with no children has seen the largest change. For one year the credit was almost tripled ($1,502) but it is back to $560 and the minimum age was 19 with no maximum age. Now the credit is limited to those between 25 and 65.
Outside of tax reform, there are some other key reasons your taxes might increase:
Don’t worry if this is overwhelming. Jackson Hewitt Tax Pros are here to help make sense of the changes. Make an appointment today.