The new stimulus bill as it stands, increases the existing child tax credit (CTC) to as much as $3,600 per child — that’s in addition to 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.
What can parents expect on the new bill?
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.
Before the new stimulus bill, 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).
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 from July 2021 to December 2021 instead of one lump sum as part of a tax refund.
How would parents know if they are eligible for the Child Tax Credit?
For 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.
Note that this tax credit applies to children who are considered related to you and reside with you for at least six months during the year.
Also note that 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.
In addition, 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.
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.
Note: This is not a legal advice. Our office do income tax preparation. Please call our office for appointment.
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