Financial Women

Three “GIFTS” the new tax bill gives to children

TAX INFORMATION YOU NEED TO KNOW

Ralph P. Guisti, President, Liberty Tax, Amherst

The tax bill recently signed into law by President Trump has many changes in store for taxpayers. Liberty Tax Amherst takes a look at three tax breaks that could help families with children.

Child Tax Credit: The $1,000 child tax credit has been doubled under the tax bill. The child tax credit, beginning in 2018, will be $2,000 per child under the age of 17. Up to $1,400 of the credit is refundable. That means, even if a taxpayer owes no tax, he or she still can receive a tax refund.

529 Plans: For years, taxpayers have been able to put money into a 529 account to save for college. Neither the earnings nor distributions in the plans was taxable at the federal level if the money was used for college costs. Under the tax bill, taxpayers can use up to $10,000 per child of their tax-advantaged 529 plans to pay for elementary and secondary schools and home school.

College and Taxes: Those paying for college will be happy to know that the American Opportunity Tax Credit and the Lifetime Learning Credit remain in place. The American Opportunity Tax Credit provides a credit of up to $2,500 for qualified tuition and expenses for the first four years of college. The Lifetime Learning Credit provides up to $2,000 per return. Also remaining in place is the up to $2,500 deduction for interest on student loans.

Liberty Tax Amherst reminds taxpayers that most of the changes in the tax bill do not go into effect until 2018 or later. A recent Liberty Tax poll* of more than 1,000 people found that about 78 percent were at least slightly concerned about tax reform affecting their 2017 tax return, which is due to be filed by April 17, 2018. Taxpayers heading to their local Liberty Tax office this tax season can rest assured that most of the changes in the new law will not affect their 2017 tax return.

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