Refundable Tax Credits have always been complex for tax-payers, but the complications arise when it involves complying with the ever-changing laws surrounding them. In America, the country welcomed a myriad of tax law changes in 2021, which we will provide a simple overview below so you can stay up-to-date with your taxes.
Refundable Tax Credits Law Changes in 2021: What You Should Know
Income Limits and a Two-Part Phase Out for the CTC
The tax year 2021 will see the return of the phase-out for the Child Tax Credit to $150,000 for married couples filing jointly, $112,500 for the head of the household, and $75,000 for the rest. The credit is now at five percent, which will be available for every $1,000 income up until the threshold reaches $2,000. Keep in mind that the credit will be the same until the income increases their income to the next threshold, which is above $3,000.
Advance Payments for CTC
Advance payments will be available for the Child Tax Credit during the tax year 2021 by the IRS. Keep in mind that these advanced payments will need to be reconciled on Schedule 8812, so you may have an excess CTC amount.
Different Take on The Child and Dependent Care Credit 2021
The Child and Dependent Care Credit will be different in 2021. For one, there is a significant increase, though the Credit will be refundable for taxpayers who have lived in the United States for more than six months, while those who stayed in the country for less the recommended timeframe will have a non-refundable credit.
The Consolidated Appropriations Act, 2021
The new law on tax provisions allows American taxpayers to prepare for their taxes for another more year, along with the benefit of reaping extensions on their tax relief provisions, deductions, credits, and more. This was passed as a way to ease the burdens and impact of the pandemic, allowing citizens to get the following:
- Taxpayers can get $600 advance payments of their tax credit, with an additional $600 for individual, qualifying child;
- Businesses can also deduct 100 percent on meal expenses for employees;
- Teachers can now include personal protective equipment as part of their deductibles;
- For those who claim a $600 deduction for joint filers, you can get an extension of $300 if it’s for cash charitable deductions;
- If expenses for the Paycheck Protection Program (PPP) loan are paid with forgiven PPP loans, they are considered deductible.
The Bottom Line: The Importance of Keeping Up-to-date withRefundable Tax Credits Laws
Tax laws are trying to stay up-to-date with the ever-changing world and society, allowing both individuals and businesses to remain competitive with the constantly changing landscape. The taxation changes we have seen in the last few years are aimed at helping businesses and individuals keep up with the advancements and innovations through tax relief, as well as investment and credit rebates.
As a business owner, you might be asking yourself how you can benefit from the tax law changes. One of the things you can do is to find ways to maximize the benefits you get from tax law changes. The best way to do this is to consult the tax experts and professionals who know how to structure your business or company so that your business can enjoy the benefits of the tax laws.
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