Some tax increases fly under the radarSubmitted by Prosperity Advisory Group on February 22nd, 2019
by Joel Morrison, CFP®, CFS®
One, presumably, unintended consequence of the Tax Cuts and Jobs Act of 2017, is that if a family has college age students, they may feel a “penalty” for that, as I will describe below. The best way to illustrate it is to use my own family situation.
I file as married filing jointly, and have 2 kids, one in elementary and one in middle school. The government decided to take away my personal exemptions but raised the standard deduction for me from $12,700 (2017) to $24,000 (2018). This wasn’t quite a wash, since my personal exemptions were $16,200, in fact I’m almost $5,000 in the hole because of it. However, they also raised the child tax credit from $1,000 for each child to $2,000 each. I’m still almost $3,000 in the hole, but maybe give them points for trying? I’m not inclined to.
However, if you have college age kids (17 and up) then it is worse. The child tax credit goes away entirely for them, as it only applies to kids under age 17, creating a de facto tax increase without calling it that. Just one of the many surprises that await taxpayers as they start to file their 2018 returns.