Elimination of Personal Exemption in 2018January 26, 2018
As many of you may have seen, last week’s article highlighted some of the changes we expect with the new federal tax laws that take effect in 2018 and future years. While these changes will likely impact everyone in some way, there are certain changes that are worth highlighting for separated and divorcing families. We will be addressing these issues through a series of articles.
This article focuses on the elimination of Personal Exemption. Many separated and divorced families often encounter a situation where they have agreed to share or divide in some fashion the claiming of their children as dependency exemptions on their income tax returns. Not only has this helped families by lowering their overall tax liability, it has also impacted how child support is calculated for families.
Beginning in 2018, these Personal Exemptions have been eliminated and parents that may be claiming their children on their income tax returns will no longer receive the exemption. Some parents may think that eliminates the need for agreements about who claims the children, or that they do not have to claim the children at all. However, that is not the case.
The new federal tax laws have also increased the child tax credit to $2000 – and you cannot benefit from the child tax credit unless you have children to claim. In order to receive the child tax credit, you will need to claim your child(ren) on your income tax return (with a valid social security number). That is why it is still important to consider the importance of who claims the children on their taxes each year.