As we get nearer to the May 17th tax deadline, there is a change that will mean more money in the pockets of parents. The 2021 child tax credit is increased courtesy of the American Rescue Plan. And what's more, you will get the money from the IRS starting July.
This is what is different than years past when claiming the child tax credit. If your child is 6 to 17 years old, and yes, 17 is included this time, then you could get a child tax credit of up to $3,000 per child. If they are 18, there’s nothing. Under the age of 6, and it’s up to $3,600 per child.
Half will come to you this year in monthly distribution either in checks or direct deposit from the IRS from July through December 2021. The second half, a tax expert we checked in with says, will come in a single lump sum.
So you could receive for a child 5 years and younger up to $300 a month for six months. From ages 6 through 17, you could get $250 a month. Babies born in 2021 are included.
And this year it’s refundable. That’s new.
"Let’s assume you are an Uber driver and you work part-time and only make $4,000. You would not get your full child tax credit in normal times," Enrolled agent Bill Nemeth said. "In other words with $4,000 of income you would not get a $2,500 refund for each child you had."
But there is temporarily a new formula, he said.
"If you made 20 grand you get the full refund per child. But this year, this year only, special special, all of it is refundable," Nemeth said.
So most families are captured by this new credit.
So be on the lookout for this money. The calculations can be confusing, so check use this calculator to estimate your status: 2021 Child Tax Credit Calculator.
Just like the stimulus checks, you do nothing unless you haven't filed your taxes. Let’s say financially you had a great 2019, but with the COVID-19 pandemic, your 2020 finances were rocked. If you haven't filed your most recent return, the IRS will use the 2019 numbers to determine your credit.
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