$3,600 Child Tax Credit for 2021: When will parents get their money? 5 things you should know

March 20, 2021 0 By boss


Money

Families with children in need of money will see some help soon. 


CNET

President Joe Biden’s American Rescue Plan is already underway with 90 million stimulus payments already sent out by the IRS (here’s how to track your payment). Another major component of the legislation is an increase to the Child Tax Credit (CTC), which could provide families up to $3,600 per child. However, the IRS says it might take some time to deliver the money. 

IRS commission Charles Rettig said there could possible delays on the expanded CTC during a House Ways and Means Committee hearing Thursday, according to the Washington Post. He explained the agency is bogged down with a backlog of tax returns. While Rettig didn’t give a timeframe of when funds from the CTC would go out, he said the agency would “do our best.”

The IRS moved Tax Day from the traditional April 15 to May 17 to allow filers to make use of the benefits from the American rescue plan such as the CTC and the unemployment insurance tax benefits. In a statement last week, the agency said it’s still working on guidance about the CTC

The expanded credit was made official after Biden signed his $1.9 trillion COVID relief bill on March 11. Families could receive more funds if they qualify. Once the CTC is in full effect, it could reduce child poverty by 40%, according to a report from the Center on Budget and Policy Priorities.

Here’s everything you need to know about the CTC, including eligibility rules for you and your kids, how much money you could get and whether the benefit will become permanent. (Here’s every way caregivers can benefit from a new bill.) 

What is the Child Tax Credit?

At a basic level, the Child Tax Credit is a credit that parents and caregivers can claim to help reduce their tax bill, depending on the number and ages of their dependents. For many, it may provide a much-needed source of relief as part of a 2020 tax year refund

Previously, the CTC was a $2,000 credit parents could claim on their taxes for every child under the age of 17 (the same age range for child dependents that was used for the first and second stimulus checks). And if that credit exceeded the amount of taxes that a family actually owed, parents could still receive up to $1,400 of the balance as a refund; this is technically referred to as the Additional Child Tax Credit or refundable CTC. For example, a married couple with children ages 5, 10 and 12 would receive a total child tax credit of $6,000 — unless they were due a refund, in which case they’d receive $4,200.


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What’s changing under the new Biden’s plan? 

The American Rescue Plan will temporarily give more money to families. Here’s everything that changes:

  • Credits increase from $2,000 to $3,600 per child under 6 and $3,000 for children older than 6.
  • The credit would also be fully refundable.
  • Money from the credit will be split: Half will be paid through the tax refund and the other half will be paid monthly from July to December.
  • There is no $2,500 earnings floor.
  • Families in Puerto Rico can receive the credit.


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Am I eligible for the Child Tax Credit?

Families with kids under 6 will receive up to $3,600 per child under the new COVID relief bill. Families with children aged 17 and under will receive a credit of $3,000 per child. Families with older kids are also eligible: You can claim $500 for each child aged 17 and 18, or for full-time college students between the ages of 19 and 24.

The tax credit applies to children who are considered related to you and reside with you for at least six months out of the year.

Note that though the eligibility requirements are relatively broad, higher-income families may receive a reduced credit. But married couples filing jointly with an adjusted gross income under $400,000 are eligible for the full amount, as are individuals with an AGI under $200,000. 

The size of the credit will start to phase out for single people earning more than $75,000 a year, heads of household earning more than $112,500 a year and married couples earning more than $150,000 a year. 

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With the Child Tax Credit for 2021, you could get more than one check this year.


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Will the CTC be based on my 2019 or 2020 tax return?

It will likely depend. The IRS will be tasked with basing your eligibility for the Child Tax Credit on your 2020 tax return, if that’s been processed by the first July payment. Otherwise — in the case of a tax return extension, for example — the agency would use your 2019 taxes to determine the amount you’re owed.

How long will the new Credit last? Is it permanent?

The Child Tax Credit for 2021 is considered a temporary reprieve for the year and would last only through 2021. Any changes to a 2022 CTC would need to take place in a separate bill.

For more information, here’s everything in the 2020 stimulus bill, when the stimulus check could arrive and how to calculate how much money you’d get in a third check. Here is also how to track your payment and what we know about using direct deposit to receive your money.

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