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2021 Child Tax Credit: Important Things to Note

2021 Child Tax Credit: Important Things to Note

One of the advantages of having a child comes to play when it is tax time as one can qualify for some money. On March 10, 2021, the American Rescue Plan Act was signed, which added to the child tax credit and specified that families could get their payments. 

The 2021 child tax credit stands out from the Stimulus check. Here are some essential things one need to know.

 

What makes 2021 Child Tax Credit Different?

Based on the new law, the child tax credit for 2021 was increased to:

  • $3000 for every kid that qualifies (ages 6 to 17) ($1000 increase)

  • $3600 for qualifying kid under age six ($1,600 increase)

Since this is a tax credit for all qualifying children, it implies that you might get twice the amount if you have two kids that qualify. 


What is the eligibility for Child Tax Credit?

For one to qualify for the complete 2021 credit, the modified AGI must be equal to, or less than 

  • $150,000 for couples that want to file jointly

  • $112,500 for HOH filers (head of household)

  • $75,000 for married filing separately and single filers

If your income is more than the amounts specified, each increase ($1000 or $1600) will reduce by $50 for every $1000 in income.

People whose kid is between ages 6 and 17 will get the regular $2000 credit value if their income is within the following range.

  • Couples filing jointly have it within $170,000 & $400,000

  • Married filing separately and single filers have it within $95,000 & $200,000

For a kid below six years, only the regular $2,000 CTC will be possible provided the income is within the following range 

  • Married with joint filing have it within $182,000 & $400,000

  • Married filing separately and single filers have it within $107,000 & $200,000

Other rules for a child tax credit apply; for instance, the kid needs to have a social security number, must be a citizen of America. Also, half of the kid’s support for the previous year needs to come from you. 


When will the tax credit Payment Come?

A couple of years ago, the child tax credit payment was gotten after filing tax returns. 

With the new changes, qualified families will get 50% of the credit in advance. Uncle Sam plans to send eligible household payments every month from July to Dec 2021. We don’t know if Uncle Sam will meet this commitment, but there are speculations that the payment will be monthly, quarterly, or a single payment.


Requirements to get the 2021 Child Tax Credit 

For people that filed either 2020 or 2019 and were eligible, half of the credit will be paid by the later part of 2021. 

Some people might not qualify for the 2019 tax return but could be eligible judging by the 2020 taxes. It is essential to file the 2020 tax return before the tax deadline – July as Uncle Sam will first consider the 2020 tax return. If it is not filed, Uncle Sam will consider the 2019 tax return. 

Kids born in 2021 will be unknown to the IRS. However, you can pass across this information by inputting it in the IRS web portal, which should be available by the middle of the year. You can do this provided you qualify, and you want some of the 2021 CTC. If you are not doing this, you might still get the entire credit if you are eligible by the time you file for 2022.


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