Child-Related Tax Changes

Adoption Benefits Increased
For 2009, the maximum adoption credit has increased to $12,150. Also, the maximum exclusion from income for benefits under your employer’s adoption assistance program has increased to $12,150. These amounts are phased out if your modified AGI is between $182,180 and $222,180. You cannot claim the credit or exclusion if your modified AGI is $222,180 or more.
Child’s Investment Income

2008

Increase in age of children whose investment income is taxed at parent’s rate. The rules regarding the age of a child whose investment income may be taxed at the parent’s tax rate have changed for 2008. These rules continue to apply to a child under age 18 at the end of the year but, beginning in 2008, will also apply in certain cases to a child who either:

  • Was age 18 at the end of 2008 and did not have earned income that was more than half of the child’s support, or
  • Was a full-time student over age 18 and under age 24 at the end of 2008 and did not have earned income that was more than half of the child’s support.

A student is a child who during any part of 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.
Form 8615 is used to figure the child’s tax. These rules also apply to parents who elect on Form 8814 to report their child’s income on the parents’ return.
Increase in investment income amount. The amount of taxable investment income these children can have without it being subject to tax at the parent’s rate has increased to $1,800 for 2008.

2009

The amount of taxable investment income a child can have without it being subject to tax at the parent’s rate has increased to $1,900 for 2009.
Earned Income for Additional Child Tax Credit

2009

For 2009, the amount your earned income must exceed to claim the additional child tax credit is reduced to $3,000.

2010

For 2010, the amount your earned income must exceed to claim the additional child tax credit is $3,000.

JOIN OUR NEWSLETTER
We'll deliver tax strategies to your inbox from our CPA firm.
We hate spam. Your email address will not be sold or shared with anyone else.