Yes, raising kids is expensive — but at least you can count on the tax breaks, right? The arrival of the recent tax law changes, however, may have left you wondering how your kiddie credits and deductions will change.

Here’s a rundown of the big changes parents can expect on the tax front, starting this year.

  1. NO MORE PERSONAL EXEMPTIONS

    Prior to the new tax law, personal exemptions lowered your taxable income. You could claim personal exemptions for yourself as well as any dependents. For the 2017 tax year, the personal exemption was $4,050, which generally meant that a married couple filing jointly with two kids could lower their taxable income by $16,200. Starting in 2018, personal exemptions are going away (at least through 2025, when much of the new tax law is currently set to expire).

    Instead, you now get a doubled standard deduction, which has gone from $6,350 to $12,000 for individual filers, and from $12,700 to $24,000 for couples filing jointly. Whether the new standard deduction coupled with expanded tax credits (more on those below) make up for the loss of the personal exemptions depends on multiple factors, including your filing status, how many children you have and how much money you make.

    “Everyone’s situation is going to be a little bit different, so it’s a good idea to do some math now so you can roughly predict the tax bill you’ll have early next year,” says Daniel Finn, an advanced planning attorney for Northwestern Mutual. And the more kids you have, the more important it will be to crunch the numbers. You may even find that you have to change what’s being withheld on your paychecks. So consider talking to your tax professional and financial advisor sooner rather than later so you’re not caught off guard when next year’s tax-filing season rolls around.

  2. HIGHER CHILD TAX CREDIT

    Not only has the child tax credit doubled from $1,000 to $2,000, the income level at which it begins to phase out has also been raised: It went from $75,000 to $200,000 for single parents, and from $110,000 to $400,000 for married couples. Parents with two kids under 17 could potentially lower their tax bill by up to $4,000, versus $2,000 prior.

    But if your child turns 17 before the end of the year, they’re no longer eligible for the credit. Also, the credit is refundable up to $1,400, which means that if you don’t owe any taxes, you could receive up to $1,400 back as part of your refund.

  3. NEW CREDIT FOR ADULT DEPENDENTS

    If your kids are older, there may still be something for you in the new tax law. You could get up to a $500 credit for adult dependents you support, which generally includes children under 24 who are students; disabled adult children; or elderly parents and relatives.

    “Everyone’s situation is going to be a little bit different, so it’s a good idea to do some math now so you can roughly predict the tax bill you’ll have early next year.”

    If you’ve got college kids, also remember that the two main tax credits for students, the Lifetime Learning Credit and the American Opportunity Tax Credit, are still intact.

  4. EXPANDED USE OF 529 PLANS

    Prior to this year, the money in 529 plans could only be used to help pay for higher education costs — at least if you didn’t want to pay taxes and penalties. Now, you can withdraw up to $10,000 a year tax-free to help pay for private school tuition for kindergarten through 12th grade. “Now that the law has changed to include tuition costs for K through 12, parents can consider starting to save in a 529 as one way to help pay for private school,” says Mark Schaubel, assistant director of planning and sales for Northwestern Mutual. “You can start saving right when your child is born, or even before, and you’ll still have a reasonable amount of time to let that money grow.”

    Unlike many of the other changes in the new tax law, this change is permanent. But before you tap those funds, check with your plan provider first. The 529 plans are state-run, and not all states may have adopted this change.

    Beyond that, consider your goals. On the one hand, if you know you plan to send your little one to a private high school, you can now use the 529 to grow your money with that goal in mind, as Schaubel described. But if paying for college is your real stressor, you may not want to withdraw funds that could have continued compounding tax-free for your co-ed-to-be.

    Also, the 529 isn’t your only option for educational costs. Coverdell accounts, for instance, “share a lot of features with a 529 plan, but they always permitted education expenses for K through 12,” Finn says. “And unlike 529 plans, they can cover costs beyond just tuition at the pre-college level — they can also cover expenses, like tutors and computers.”

    Regardless of the type of account you use, the age-old advice still stands, Finn adds: “The key thing is, no matter what you put your money into, save early.”

  5. THE “KIDDIE TAX” RATES HAVE CHANGED

    This is the tax that applies to minors’ unearned income, including interest and dividends generated by investments their parents give to them in a Uniform Transfer to Minors Act (UTMA) custodial account. Previously, any unearned income over $2,100 was taxed at the parents’ marginal tax rate. Now, it’s subject to the tax rates applied to trusts and estates, which have only four tax brackets ranging from 10 percent to 37 percent.

    The 37 percent rate for trusts and estates starts at a mere $12,501 of income, whereas a married couple wouldn’t hit that rate until their income surpassed $600,000 — which means your child’s unearned income will hit the top tax bracket much more quickly than before. “Now, for example, if you had given stock to your kids through an UTMA, their tax bill could increase in 2018,” Finn says. This is a considerable change, and one parents will want to take into account when deciding how much to transfer to their child’s UTMA account — or even whether it makes sense to open one at all.

This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.

All investments carry some level of risk including the potential loss of principal invested. No investment strategy can guarantee a profit or protect against loss.

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