For years, taxpayers have enjoyed a certain number of personal exemptions at tax time. If nothing else they could count themselves. If you were married and dependent children then the number of exemptions just kept going up. But now things have changed under the Tax Cut and Jobs Act. So here’s what you need to know.
Gone is the personal exemption, which in 2017 was worth $4,050 for each dependent you claimed, including yourself. That is a lot of money for families with many children or other dependents. The standard deduction has gone up, but for big families the increase will not be enough to offset the difference from losing the personal exemption.
On the plus side, the Child Tax Credit is still in place and it could be worth as much as $2,000 per qualifying child. The exact amount will depend on your income. The credit is also refundable now. In years past it was not. That means if the credit exceeds your tax liability you receive the remaining amount as a cash credit. That could help offset losing the personal exemption, as well.
It remains to be seen how each family with dependents is affected, but the bottom line is the new tax law could change your tax situation this year. If you want to get a better idea of your tax liability for the 2018 tax year, then click here to use the IRS withholding calculator. You should do this sooner rather than later.