The $1.9 trillion aid package that President Joe Biden signed into law in March temporarily expands the child tax credit.
For the 2021 tax year, the credit is upped to $3,000 per child age 17 or younger and $3,600 for children under the age of six. That’s up from the original $2,000 child tax credit which was only sent for children age 16 or younger. Refer to Advance Child Tax Credit Payments in 2021
Up to half of the 2021 child tax credit could be paid out in periodic payments starting this summer.
Per the legislation (SEC. 9611. Child tax credit improvements for 2021), tax filers can get an advance on up to half of the tax credit throughout 2021 in installments from July through December, and the remainder when they file their taxes in 2022,” said Daniel Ahart, chief tax officer at the tax preparation company Daniel Ahart Tax Service®. “And the best part is that the child tax credit is a fully refundable tax credit, so you don’t have to pay it back.”
Who qualifies for the child tax credit?
Much like the stimulus payments sent out to millions of Americans, the 2021 child tax credit comes with new income cutoffs, too.
- Single filers making up to $75,000 per year in modified adjusted gross income, heads of households making up to $112,500 a year.
- Couples filing jointly making $150,000 or less per year can qualify for the full credits.
- Above those income levels, the payments would phase out by $50 for every $1,000 in income over that limit, per the stimulus bill.
- People above the threshold can still get the regular tax credit, which would provide $2,000 per child under the age of 17 for people making less than $200,000 annually or couples making below $400,000.
And remember, the IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the CTC as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit (EITC). Filing electronically with direct deposit also can speed refunds and future advance CTC payments. Schedule a consultation with your tax experts now.
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