What Changes Did Congress Make To The Child Tax Care Credit Through The American Rescue Plan In 2021?

In 2021, Congress passed the American Rescue Plan. As a part of that plan, they voted to make two big changes to the Child Tax Credit. For one, they increased the credit to range to up to $3,600 total for children aged 5 and younger, and to up to $3,000 total for children aged 6-17. The second big change is that the IRS will now pay one-half of your 2021 credit to you in monthly instalments (of up to $300 monthly for children 5 and younger, and up to $250 monthly for children 6-17) starting on July 15th, 2021. It will be paid in a total of six payments on the 15th of each month, unless the 15th falls on a holiday or a weekend.

Do All Families Qualify For The Higher Per Child Tax Credit For 2021?

Most families that claimed the Child Tax Credit before 2021 qualify for the higher Child Tax Credit rate in 2021. There are a few general qualifications to receive this higher rate of credit in 2021. To qualify, you:

  1. Must Have A Qualifying Child: In order to collect the Child Tax Credit, you must have at least one child, age 5 or under and/or age 6-17 (depending on the credit in question)
  2. Must Have Collected Child Tax Credit In 2019 Or 2020 (With Some Exceptions): Most people need to have a history of claiming the child on their taxes within the past two years to qualify for this higher rate. However, there are some exceptions.
  3. Must Live Primarily In The United States In 2021: Your main residence (and that of your children) must be located in the United States.
  4. Income Requirements: In order to qualify for the full amount of the new Child Tax Credit, your modified adjusted gross income (as reported on your taxes) must be:
    • $150,000 or under for a married couple filing jointly (or qualified widows/widowers)
    • $112,500 or under for a head of household filer, and
    • $75,000 for single and married people filing separately
Can I Collect The Child Tax Credit For My Child Who Turns 17 In 2021?

Yes, if your child is 17 years old or younger as of December 31st, 2021, you can still claim their portion of the Child Tax Credit.

What Does It Mean That The Child Tax Credit Is Fully Refundable For 2021?

When the IRS says that the Child Tax Credit is “fully refundable”, it means that when you claim the credit on your 2021 tax return, it may result in you paying no tax or even being entitled to a refund. That refund is actually a portion of the Child Tax Credit, and Congress is allowing you to take that portion as a refund.

Should I Opt Out Of The Child Tax Credit For 2021?

Whether or not to opt out of the Child Tax Credit in 2021 depends on your unique financial circumstances, and is a question that you should discuss with your financial advisor or tax preparer. People who usually end up having to pay additional taxes when they file their return should probably opt out. Also, some people may have to repay some of the tax credit depending on other factors in their tax return. So again, you should discuss this matter with your financial advisor.

What If My Income Goes Up In 2021, And I Have Taken The Advanced Child Care Credit?

If you have already taken the advance on your Child Tax Credit and then your income rises, you may have to repay some of the tax credit that you have already received in the partial payments. This would be dependent upon all of the factors in your 2021 tax return.

When Will The IRS Start Making Payments For The Child Tax Credit In 2021, And How Many Payments Will I Get?

Partial or “advanced” payments will begin on July 15th, 2021, and continue monthly through December on the 15th of each month (unless the 15th falls on a weekend or a holiday). This amounts to six advance payments total.

What If My Family Circumstances Change During The Year And I Have More Income Or Less Income Than Is Shown On My 2019 Or 2020 Return?

If that occurs, you should check with your personal financial advisor or tax preparer about how it might affect you regarding the Child Tax Credit. However, you can opt out of the program at any time. In addition, the IRS is in the process of setting up a portal on their website where you can go in and apply for a credit adjustment if you feel it is warranted by change of circumstances.

For more information on Child Tax Credit Laws In South Carolina, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.

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