The child tax credit will increase by $1,000 in 2018’s tax return (filed in 2019), thanks to the new Tax Cuts and Jobs Act implemented by the Trump administration. The new enhancements could greatly impact low-income families in the CNMI.
On Dec. 22, 2017, President Donald Trump signed into law the new TCJA and one of the biggest changes that was implemented was the increase in the child tax refundable that an eligible child can receive.
Many taxpayers in the CNMI with U.S citizen children, when filing their taxes, file their children as dependents. If a child is below the age of 17 and the taxpayer earns an income of at least $3,000, the credit is refundable.
For years, under the pre-TCJA law, only $1,000 was refundable per qualifying child; since the implementation of the TCJA 2017, the child tax credit under 2018 tax reform is now worth up to $2,000 per qualifying child.
A parent who doesn’t want to be named and has two children, 12 and 15, said the over $1,400 child tax credit that they receive each year is for her children’s needs, especially for school supplies.
“The child tax really helps us. I work two jobs just for rent and basic necessities. With the increase, it will help not only to buy the supplies that my kids need for school, but also for what they want, and even to save for their education,” the parent said.
The parent said the enhancement made to the TCJA is a blessing.
“I can work three jobs but it is not enough to put the two of them through college but that’s not their fault. This (child tax enhancement) gives them a chance to do better for themselves,” the parent said.
During a presentation by Ernst & Young accountant Shamika Rawatte at last Tuesday’s Rotary Club of Saipan weekly meeting, he said the TCJA enhances the child tax credit but also prevents undocumented aliens from availing of the refund.
The enhancements made to the child tax credit would greatly impact the island because families are usually larger in the CNMI compared to the United States.
“There are a lot of people here who have big families, so if you have a lot of kids, it’s beneficial for you,” said Rawatte.
According to Rawatte, the reason the enhancements to the child tax credit were made was because of the removal of personal exemptions.
“There are no more personal exemptions. …Now, instead of the personal exemption, you have an enhanced child credit,” he said.
Requirements to avail of the child tax credit have also gotten stricter.
“It’s the same (17 and below) but your child needs to have a Social Security number, and must be a U.S citizen or resident,” he said.
All the requirements remain the same but for the past years, taxpayers were able to claim dependents with tax identification numbers as a sort of substitute for a SSN, but tax identification numbers will no longer be valid under the newly implemented TCJA.
“The only way a child could have a Social Security number is if they were born in the United States,” he said.