Thanks to a new tax credit under the American Rescue Plan, many American parents will now receive tax credits to help pay for the expenses of child rearing. These funds, which apply to the 2021 tax year, are an increase to the regular Child Tax Credit. The amount credited depends on the age of the children in the home, and the parent’s (or parents’) income.
Eligible families will begin receiving a monthly tax credit on July 15, 2021. It is a recurring payment on the 15th of every month, unless that date falls on a weekend or holiday.
Let us break down the most important questions for you, so you can determine eligibility and how to receive the funds for your family.
Am I eligible for the new Child Tax Credit?
The eligibility requirements are as follows:
- You have a child aged 17 or younger
- You are a parent with single filing status, or married filing separately, and you make up to $75,000
- You are parents filing married filing jointly, or a parent filing as a surviving spouse, and you earn up to $150,000 a year.
- You are a parent filing as head of household and you earn up to $112,500
How much money will I receive?
The amount of money disbursed depends on the age of the children, as well as your income bracket in relation to the above eligibility criteria.
- If you have a child under the age of 6, you will receive $3,600 (total) for each qualifying child.
- If you have children between the ages of 6 and 17, you will receive $3,000 for each qualifying child.
These payments will be sent in advance of your 2021 tax filing. This means that, instead of receiving a credit after you file your taxes in 2022, you will receive the money ahead of time.
Starting July 15, 2021, families with children under the age of 6 can expect to receive up to $300 a month per eligible child. Families with children between 6 and 17 can expect to receive $250 a month per eligible child.
What if I make more than the income brackets? Am I still eligible?
Yes, if you make more than the amounts provided for in the eligibility requirements, you are still eligible. The amount will be adjusted according to your income. For every $1,000 that you exceed the income bracket, credit will be reduced by $50.
Even if your income considerably exceeds the amounts specified in the extended Child Tax Credit initiative, you are still eligible for the existing $2,000 tax credit for children under the age of 17. This Child Tax Credit is available for individuals earning up to $200,000 or for those married filing jointly up to $400,000.
How can I claim the expanded Child Tax Credit?
According to the IRS, most people will not have to do anything to claim the expanded Child Tax Credit. It will be automatically applied. The IRS will determine eligibility based upon your most recent tax filings.
Should you have any questions about the expanded Child Tax Credit, or other components of the American Rescue Plan, contact us today.