In last week’s post, we discussed how the Tax Cuts and Jobs Act (TCJA) can drastically change the impact of taxpayers’ paycheck withholding. This week, we take a closer look at how this new legislation impacts taxpayers with dependents.
Anytime you start a new job, you designate how much you want your employer to withhold from your paycheck—and be put towards your annual income tax. This decision can mean the different between a sizeable refund or an alarming bill come Tax Day.
How TCJA affects taxpayers with dependents
The passing of the TCJA affects taxpayers with dependents particularly strongly—which can have a significant effect on their bottom line:
- The child tax credit has doubled.
- There is a $400 increase in the additional child tax credit.
- There is a new $500 tax credit for other dependents—e.g., elderly parents or qualifying relatives.
- Taxpayers can no longer claim an exemption for themselves, their spouse or their dependents.
What you can do
It can be complicated to understand how the new tax landscape impacts your situation. Fortunately, there’s a simple way to get the answers you need.
To avoid an unpleasant surprise the next time you file your taxes, it’s worth checking to see how your current withholding is affecting your taxes under the new law. You can do this by using the online withholding calculator on the IRS website.
If the results indicate that you would be better off amending your withholding, it’s worth it to file this change with your employer’s human resources department as soon as possible—in order to improve your tax situation for the remainder of the year.