by Laurie Marshall
How will the biggest tax changes in 40 years affect families with children? Metro Detroit financial advisor, and mom, Laurie Marshall has the answers. Read on to find out what’s changing and for planning tips to deploy now so you’re in the best situation possible come tax season next year, when the changes take effect.
- 529 Savings Accounts. Previously for college or post-secondary education only, these will now allow for pre-tax savings towards K-12 education as well, up to $10,000 per year.
- The Kiddie Tax. If your child earns $2,100 or more in a year, that money will be taxed at the highest possible tax bracket (37%), rather than the parents’ bracket.
- Personal and Dependent Exemptions. In 2017, each spouse and child received a $4,050 exemption and starting in 2018, that is gone.
- Child credit. The credit for child care expenses has gone up to $2,000, with up to $1,400 of it possibly refundable.
What’s the Same?
- College Costs
- Deduction for student loan interest remains
- Grad student tuition waivers stay tax free
- Lifetime Learning Credit and the American Opportunity Tax Credit remain
- Employer-Related Programs
- Employer-Paid Tuition - Amounts paid on your behalf by an employer up to $5,250/year are not considered taxable income for you
- Adoption assistance programs
- Dependent care accounts that enable employees to put up to $5,000 in a savings account tax free (these will be eliminated in 2023)
Things to plan for now:
- Consider filing your child’s taxes separately from your own. With the exemption for dependents gone, this may be worthwhile.
- Stock your child’s 529 to the brim, especially if your child attends a private school.
* This blog was originally posted at ljpr.com.