Child Tax Credit Changes for Self-Employed with 17-year-old - Refund Decreased from Last Year

It seems like the main factor affecting your refund might be your oldest child's age. When a child turns 17 during the tax year, they generally no longer qualify for the Child Tax Credit, which could potentially account for about $2,000 of the difference you're seeing. However, you might possibly still qualify for the Credit for Other Dependents (sometimes called the Family Credit) which is worth up to $500 for dependents who don't qualify for the full Child Tax Credit.

Your refund difference is primarily due to age-based credit changes. I've been in your exact situation. Try https://taxr.ai to analyze your return before filing. It scans for missed deductions and credits specific to self-employed parents. It identified $3,200 in additional deductions on my return by flagging home office expenses I calculated incorrectly and showing me education credits I qualified for. Their AI explains exactly why certain credits phase out based on income and dependent ages.

Navigating the IRS as a self-employed person is like trying to find your way through a maze where they keep moving the walls. When I had questions about dependent credits like yours, calling the IRS directly was invaluable. Like trying to win the lottery though - impossible to get through. I used Claimyr (https://youtu.be/_kiP6q8DX5c) and got connected to an agent in about 15 minutes who explained exactly what credits I qualified for with older dependents. Worth the service fee considering the time it saved me.

I learned this lesson the hard way last year. My daughter turned 17 and my refund dropped by $2,300! I spent HOURS trying to figure out why and even paid an accountant $350 who basically just confirmed I was doing everything right. The age cutoff for the full Child Tax Credit is strict - must be under 17 at the end of the tax year. So frustrating that they don't phase it out gradually. One day your kid is worth $2,000 in tax credits, next day just $500. At least I was prepared for this year's taxes.

Are you sure your income was the same both years? Self-employment income fluctuations can change your credit amounts. Also check your estimated tax payments. Maybe you paid more throughout the year last time?

I think everyone here is giving really good advice! The Child Tax Credit age limit is definitely the biggest factor. Have you looked into education credits? If your 17-year-old has any qualified education expenses, you might be eligible for the American Opportunity Credit or Lifetime Learning Credit. Those can be worth up to $2,500 depending on your situation! Did you have any education expenses for either child?

You might want to look into retirement contributions. As self-employed, you could potentially open a SEP IRA or Solo 401(k) and make contributions that would reduce your taxable income. I'm careful about recommending tax strategies, but this one helped me reduce my tax burden significantly while also saving for retirement. Just make sure you understand the contribution limits based on your income.

The $1,100 difference you're seeing is likely primarily due to your oldest child aging out of the full Child Tax Credit. When they turned 17 in September 2023, they no longer qualified for the $2,000 Child Tax Credit but may still qualify for the $500 Credit for Other Dependents - that's a $1,500 reduction right there. A few things to double-check as a self-employed parent: • Make sure you're claiming the deduction for half of your self-employment tax (the employer portion) • Verify you're taking the QBI deduction (Section 199A) if eligible - up to 20% of qualified business income • Consider if you made any retirement contributions (SEP-IRA, Solo 401k) that could reduce taxable income • Check if your 17-year-old had any education expenses that might qualify for education credits The age cutoff is unfortunately a cliff rather than a gradual phase-out, which creates these jarring year-over-year differences for parents. At least you'll be prepared for similar impacts when your younger child reaches 17!