Page 76 - Family Law Services

Child Tax Credit: IRC Section 24

The definition for claiming a child under the child tax credit remains the same under TCJA. This credit
is available to eligible taxpayers for each child under age 17 as of December 31. The credit in 2018 is
increased to $2,000 per qualifying child age 16 and under. Note that the refundable part of the credit is
limited to $1,400. For children age 17 to 19 or 17 to 24, if the child is in college, there is a $500 nonre-
fundable child tax credit available. The credits do phase-out for adjusted gross income of $200,000 or
greater for head of household, married filing separate or single filing.

Child and Dependent Care Credit

The child and dependent care credit is a tax credit available to the custodial parent of 1 or more children
under age 13. This credit is for qualifying childcare expenses incurred by the parent for the purpose of
seeking employment or working. This tax credit can offset both regular tax and AMT. Qualifying ex-
penses include day care centers, in-home providers, school costs, and day camps. The maximum qualify-
ing expenses is $3,000 for 1 child and $6,000 for 2 or more children.

Education Credits

Currently, two tax credits and several tax incentives may be available to taxpayers who pay higher edu-
cation costs and meet several qualifications, including income phaseouts. The parent who receives the
dependency exemption may be entitled to claim the tax credits and incentives; however, if the eligible
parent does not claim the student as a dependent, then the student may be eligible to claim the appropri-
ate education incentives. Under no circumstances can the noncustodial parent claim the education cred-
its.

American Opportunity Credit

The American Opportunity Credit is a partially refundable tax credit of 100% of the first $2,000 and
25% of the next $2,000 for each of the first 4 years of postsecondary tuition and fees. The maximum
credit is $2,500 per student per year, and more than 1 student per household may qualify. The student
must be enrolled in a qualified program that leads to a degree or certificate and must be enrolled full
time.

Lifetime Learning Credit

The Lifetime Learning Credit is a nonrefundable tax credit of 20% of up to $10,000 of qualified tuition
and fees paid during the tax year, with a maximum of $2,000. This credit is not restricted on the number
of years it may be taken; however, the credit is limited per taxpayer regardless of the number of students
in the family. A taxpayer may not claim both the Lifetime Learning Credit and the American Opportuni-
ty Credit in the same year.

Higher Education Deduction

Taxpayers may claim an "above the line" deduction for qualified tuition and fees. This education deduc-
tion applies even if the taxpayer does not itemize deductions, but is limited to $3,000 and cannot be
combined with other tax credits. Additionally, some education expenses are not eligible for the special
above-the-line deduction under IRC Section 222; however, they may be deductible provided they are
expressly required by an employer, by law, or by government regulation, or the course maintains or im-

74 © 2020 Association of International Certified Professional Accountants