- Understanding How Child Tax Credit Has Shifted in 2021
Understanding How Child Tax Credit Has Shifted in 2021
Everyone can agree that 2020 was a tough year financially. Keeping on top of bills, taxes, and your income wasn’t an easy feat. That may have played a part in the American Rescue Plan’s updates this 2021 in trying to make the landscape a little more bearable for everyone. The Child Tax Credit is probably one of the most significant changes in the year. Although the concept of it isn’t new, the Child Tax Credit will hopefully be more effective in helping families overcome their debt and reduce poverty. Similar to some tax credits, the main purpose of the Child Tax Credit is to give families with children tax refunds. That amount can then be used to subtract the amount of tax a family owes to the government. The new changes are something to be mindful of, especially amid tax preparation during and at the end of the fiscal year. Here’s what you need to know and understand about the recent changes to Child Tax Credit:
Tax Credit Increase
The American Rescue Plan usually has been untouched since 2020. However, the law has been changed in 2021 to ensure that families will get a more considerable sum of maximum tax credit for each of their children. For every child under the age of six, the family can be granted a maximum tax credit of $3,600. For every child under the age of 18, the family gets a maximum tax credit of $3,000. The Child Tax Credit used to recognize children who were only 16 years old and younger. Along with the increase, the Child Tax Credit’s terms seem to be fully refundable, unlike in 2020, where it was only partially available. It’s still uncertain whether these circumstances will hold beyond the 2021 tax year yet.
People who hope to access and use child tax credit must have an adjusted gross income of $75,000 or less if they’re a single filer. The AGI must reach $150,000 for joint filers and $122,500 for a head of household filer. Families with higher income can still access older thresholds to receive a bit of tax credit. In addition to this, the Child Tax Credit has also been extended to other US territories. Families in Guam, Puerto Rico, and more will be able to access the benefits provided by the American Rescue Plan’s updates.
Monthly Payment Options
Another significant shift in the Child Tax Credit is how families can choose to access it. Both the Internal Revenue Service and the Bureau of the Fiscal Service will provide monthly payments to families who will opt for the funds. This change is in contrast with reducing their taxes at the end of the year with the accumulated credit that they’ve come up through. Families can start getting their monthly payments by the 15th of July this year, with more details to come out soon.
It’s crucial to stay on top of things as new updates regarding the Child Tax Credit and general tax come every day. With the responsibility of holding your client’s taxes, one must be as accurate as possible in organizing and calculating. Looking for the best professional tax software
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