Tips for Family & Education Planning Under the New Tax Law

By: Pedro T. Rincon, CPA, CVA

With the school year just beginning, now is a good time to start thinking about how the new tax law can impact your family and educational plans.

Child & Family Credit
The new law – passed in December 2017 –  increases the child tax credit to $2,000 per qualifying child; $1,400 of this amount is refundable. The law also adds a $500 nonrefundable credit for qualifying dependents other than children. More importantly, the law increases the phase-out for the child tax credit. That number has risen from $110,000 to $400,000 for married taxpayers filing a joint return, and from $75,000 to $200,000 for other taxpayers.

The “Kiddie Tax” 
The tax on unearned income of children has been completely overhauled. Parental income and the unearned income of siblings both no longer factor into the equation. Instead, the earned income of a child is taxed according to an unmarried taxpayer’s rates. Taxable income attributable to net unearned income is taxed according to the unfavorable tax rates applicable to trusts and estates.

Education Benefits
Education benefits such as the student loan interest deduction, education credits, exclusion for savings bond interest, tuition waivers for graduate students, and the educational assistance fringe benefit remain intact.

Section 529 Plans
Qualified education expenses of a 529 account are expanded to include up to $10,000 per year for a child’s elementary and secondary education, whether that education is in a public, private, or religious environment.

More than ever, this year it is important to be having discussions with your tax professional about how the new tax law impacts your finances and your family.

Contact: Mr. Rincon is a partner with Osborne Rincon, CPAs in La Quinta. He can be reached at (760)777-9805 or