Income is no bar. However, you might have to payback the money so chose wisely while opting-in.
Starting July 15, millions of American parents are now receiving a monthly tax benefit for the dependent children. Under the Biden administration, the advance tax benefit amount that the federal government rolls out every year has seen plenty of significant changes. The first monthly payout was rolled out on July 15. Therefore, if you haven’t yet braced yourself up, here is everything you should know.
- The first monthly payment rolled out on July 15, 2021.
- Biden administration temporarily expanded the tax credit amount in 2021 for quicker COVID-19 recovery.
- Phasing out limit set at $75,000 in earnings; minimum earnings criteria eliminated.
- 36 million American families to be benefited by the $3600 per child cheque.
Parents in the U.S. with dependent children under the defined age are granted a monetary tax benefit to ensure a safe future of America’s youth. This year, almost 36 million families are going to avail the benefit of advance child tax credit.
SO WHAT’S NEW ABOUT CHILD TAX CREDIT 2021?
In the wake of havoc wreaked by COVID-19 led pandemic, the Biden administration has raised the amount offered to each family per dependent child. Earlier the CTC amount was fixed at $2000 per dependent child. In 2021, each family with dependent child under 6 years of age will get $3600 per child. Additionally, the age limit for child tax credit has also been raised to 17 for 2021.
Every family with dependent child of 17 years of age or below and above 6 years will get $3000 per child. This translates to $300 and $250 per month respectively. Additionally this year, the child tax is fully refundable unlike 2020 when it was partially refundable.
ARE YOU ELIGIBLE FOR CHILD TAX CREDITS?
There are a lot of eligibility parameters that would decide if you can receive the tax benefit or not. The first and the most significant factor is the income criteria. There is always a minimum income criteria to qualify for tax benefit. However, this year people with no income are also eligible to avail the amount. Of course, this criteria comes with other mandatory parameters discussed below-
Its compulsory for spouse to have an Individual Taxpayer Identification Number (ITIN) or a Social Security Number (SSN). Additionally, the dependent children too, must possess an SSN.
The child must qualify to be a dependant child-
- Valid relationship with spouse- child, grandchild, stepchild or adopted child; a younger sibling, step-sibling, half-sibling, or their descendent; a foster child placed with you by a government agency.
- The child must be under the age of 17 or equal as on Dec 31, 2021.
- The child should be proven dependant on the spouse and must not be supporting more than half of their expenses.
- The child must be a resident of the United States for at least 6 months. However, there is an exception for non-custodian parents. This criteria is not mandatory for non-custodian parents if they secure a waiver from custodial parents in favour of availing the child tax credit.
HOW MUCH DO YOU GET UNDER CHILD TAX CREDIT?
Minimum income is no bar this year. Every spouse with dependent child under 6 years of age gets $3600 in tax credit while for children above 6 and under 17 years of age, the amount is fixed at $3000. However, there is decided phasing out level for the families.
Every parent is entitled to full amount up to $75000 in earnings ($150,000 for married couples and $112,500 for heads of households). However, for each $1000 earned above this income bar, $50 will be deducted from the tax credit amount.
There is another catch. A lot of analysts and financial experts are even advising parents to opt-out of the child tax credit this year. The reason is that they might have to payback the amount.
This year, you can receive the amount if your filed your tax return in 2020. Your eligibility for 2021 will be calculated based on your earnings in the last year. However, your real income for 2021 will be calculated when you file your tax return for this year. If you earned more than what you earned in 2020 and if you cross the $75000 phasing out limit, you will have to pay back any extra amount due on the tax credit.
If you still wish to opt-in to avail the tax benefit and match the eligibility criteria listed above, you don’t have to go any extra mile to get the amount. File for child tax credit on IRS website and the amount will directly reach your account on the due date.