The final version of the Republican tax bill released by a congressional conference committee on Friday holds that your 16-year-old child who is living in your home this year and attending high school will no longer be your child next year—even if they continue living in your home and attending high school.
That is because they will turn 17--the age at which the Republican congressional leadership has decided American parents should no longer be able to claim a child tax credit for their child.
This is in contrast to the version of the bill that passed the Senate, which, through 2024 at least, would have allowed parents to claim the child tax credit for their children until they turned 18.
Your newborn, who will be eligible under the final Republican bill for an increased “child” tax credit next year, will no longer be eligible for that increased credit when he or she is 9 years old--because the increased credit will disappear after 2025.
“Thus,” says the committee’s report on the bill, “a qualifying child is an individual who has not attained age 17 during the taxable year.”
“As was the case with the Senate amendment,” the report on the bill says about its increased child tax credit, “the provision expires for taxable years beginning after December 31, 2025.”
The bill also “suspends” the “personal exemption” in the tax code, which is especially helpful to large, traditional families.
Under the current tax law, as explained in the conference committee report on the bill, taxpayers can use the “personal exemption” to claim a deduction from their taxable income for all dependents, whether they are children or not. In 2017, the personal exemption will allow a taxpayer to deduct $4,050 from taxable income for each dependent.
The Republican bill suspends the personal exemption from 2018 through 2025. So, this year, under current law, a married couple with five children will be able to deduct $28,350 from their taxable income using seven personal exemptions. But, under the Republican bill, they will be able to deduct $0 for personal exemptions in 2018—and 2019, 2020, 2021, 2022, 2023, 2024 and 2025.
“Under present law, in determining taxable income,” says the committee report, “an individual reduces AGI [adjusted gross income] by any personal exemption deductions and either the applicable standard deduction or his or her itemized deductions. Personal exemptions generally are allowed for the taxpayer, his or her spouse and any dependents. For 2017, the amount deductible for each personal exemption is $4,050. The amount is indexed annually for inflation.”
“The conference agreement follows the Senate amendment and suspends the deduction for personal exemptions,” says the report. “The suspension does not apply to taxable years beginning after December 31, 2025.”
The Republican bill attempts to make up for this massive change in the tax status of families by temporarily increasing the child tax credit—but does so only for children who have not hit their 17th birthday.
Under current law, the committee report explains: “An individual may claim a tax credit for each qualifying child under the age of 17. The amount of the credit per child is $1,000.”
The House version of the bill proposed increasing this to $1,600 for children under 17 and allowing families a $300 credit for each spouse and non-child dependent. But the House bill also proposed ending the $300 credit for the taxpayers and their non-child dependents after the 2022 tax year. So, under the House version a child who is 17 or older in 2022 would qualify for neither the personal exemption nor the child credit.
The Senate version of the bill was more generous—on a temporary basis. It proposed increasing the credit to $2,000 for children through their 17th year—terminating it only when they reached 18. It also proposed a $500 credit for dependents who are not children qualfying for the $2,000 credit.
But, under this Senate proposal, the increase in the age definition of a “child” (to include 17-year-olds) would have expired after 2024. Thus, if you had a 17-year-old child in your household in 2025, that child would no longer be a child under this provision.
But, then, after 2025, the Senate’s proposed increase in the child tax credit would expire.
The final version of the bill produced by the conference committee persisted in suspending the personal exemption but compromised between the House and Senate versions of the child and dependent tax credits.
It increases the child tax credit to $2,000 –temporarily--and creates—temporarily--a $500 credit for non-child dependents.
Both the increase in the child credit and the $500 credit for non-child dependents would expire after 2025.
The final version of the bill also rejected the Senate’s proposal to treat a 17-year-old child as a child. In the final bill, parents can claim the child tax credit for their child only through their 16th year. When the child turns 17, they will no longer be eligible for the child tax credit.
“The conference agreement temporarily increases the child tax credit to $2,000 per qualifying child,” says the committee report on the bill. “The credit is further modified to temporarily provide for a $500 nonrefundable credit for qualifying dependents other than qualifying children. The provision generally retains the present-law definition of dependent.”
“Further,” the report says, “the conference agreement retains the present-law age limit for a qualifying child. Thus, a qualifying child is an individual who has not attained age 17 during the taxable year.”
“As was the case with the Senate amendment,” it says, “the provision expires for taxable years beginning after December 31, 2025.”
It would take effect, the report says, “for taxable years beginning after December 31, 2017.”
Under the current law, the child tax credit begins to phase out for single persons at the $75,000 income level. For married couples, it begins to phase out at $110,000. In the final version of the Republican bill, the child tax credit begins to phaseout for single persons at the $200,000 income threshold and for married couples at the $400,000 income threshold.