American Rescue Plan Enhances Child Tax CreditApril 08, 2021
The Child Tax Credit has been increased for 2021! Here’s how you can benefit.
Have you read our blog, Biden Signs the American Rescue Plan: What’s Inside? You’ll want to check out the financial relief measures for individuals, families and businesses. One key provision is the increased child tax credit. Here’s what you should know.
What is the child tax credit?
If you have children under age 17 at the end of a calendar year, you are eligible for a tax credit of up to $2,000 per dependent child on your return, in addition to the exemption deductions you take for dependent children.
What did the ARC change?
For 2021 only, the credit has been increased from $2,000 to $3,000 per child, or $3,600 for a child under age 6. The credit is fully refundable and available to qualifying children who haven’t reached 18 by the end of 2021. The $500 partial credit for dependents other than qualifying children remains nonrefundable.
For phaseout purposes, the child tax credit will be broken up into two parts:
1. The original $2,000 credit. This portion is subject to a phaseout when modified adjusted gross income (MAGI) exceeds $200,000 ($400,000 for married couples who file jointly).
2. The increased amount. A separate phaseout applies to this portion of the credit. The phaseout thresholds start at the following MAGI levels:
- $75,000 for single people and married people who file separately,
- $112,500 for heads of households, and
- $150,000 for married couples who file jointly.
Starting in July, the child tax credit will be sent out in monthly payments to eligible taxpayers, rather than being added to the family’s refund at tax-time. The amount of each monthly payment will equal 1/12 of the total amount for the year.
Check out our blog https://kahnlitwin.com/blogs/tax-blog/last-minute-tax-savings-opportunities-for-2021 for more opportunities to save on taxes this year.
Questions? Contact us.