Child tax credit 2021 approval could bring more money than stimulus checks. What to know

March 10, 2021 0 By boss

[ad_1]

Money

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


CNET

After passing the Senate on Saturday, President Joe Biden’s $1.9 trillion relief plan is back to the House of Representatives for a vote — which is expected to take place Wednesday morning — and then will be sent to Biden for his signature. Before the end of the week, Americans should know if they’ll be eligible for the third stimulus check of up to $1,400extended unemployment benefits and more money from the Child Tax Credit.

As it stands, the COVID-19 relief bill increases the existing child tax credit (CTC) to as much as $3,600 per child — that’s more than double the $1,400 per dependent in the stimulus check. It would also let families receive the funds “periodically” instead of just annually during tax season. This increase in the CTC would reduce child poverty by 40%, according to a report from the Center on Budget and Policy Priorities

Here’s what you need to know about the CTC, including qualification requirements for you and your kids, how much money you could get and what could change before it’s signed into law. (Here’s every way caregivers can benefit from a new bill.) 

What exactly 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

The CTC right now is a $2,000 credit parents can 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 exceeds the amount of taxes that a family actually owes, parents can 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’re due a refund, in which case they’d receive $4,200. 

Biden’s plan will temporarily increase the amount 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 and there wouldn’t be a $2,500 earnings floor. Also, the plan would allow families to receive funds as monthly payments July 2021 to December 2021 instead of one lump sum as part of a tax refund. 


Now playing:
Watch this:

Stimulus check No. 3: What you need to know



2:59

How do I know if I’m eligible for the Child Tax Credit?

Families with kids under 6 would receive up to $3,600 per child under the new COVID relief bill. Families with children aged 17 and under would 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 would 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. 

054-cash-money-stimulus-checks-bill-passed-congress-1400-dollars-payment-target-supplement-bullseye-2021-biden

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


Sarah Tew/CNET

Other ways the Child Tax Credit would change with the new relief bill

In addition to new qualifications and payment amounts, the American Rescue Plan Act of 2021 would expand the tax credit so that:

  • The credit would be fully refundable.
  • There’d be no dollar cap and earnings limits that prevent many low-income families with children from receiving the full credit, according to the Center on Budget and Policy Priorities
  • Payments would be sent monthly over the course of a year, starting in July to December 2021, instead of once during tax season.

The bill also would expand other child-related credits so families could claim up to half their child-care expenses on their taxes.

For the bottom 20% of families in terms of income, the proposed expansion of the CTC would increase income by an average of 9.7% — even higher if you consider only tax filers with children, according to the Institute on Taxation and Economic Policy. The proposal would also lift 4.1 million children above the poverty line, cutting the number of children in poverty by more than 40%, the Center on Budget and Policy Priorities found. 

Will the Child Tax Credit be based on my 2019 or 2020 taxes?

It would 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 Child Tax 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.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.



[ad_2]

Source link