The US bailout promulgated in March includes a big boost for parents: a significant increase in tax credits for their children.
How will they work?
here is a look at the changes the child tax credit and what they mean in the future:
How much is the increase?
The American Rescue Plan increases the Child Tax Credit amount from $ 2,000 to $ 3,600 for children under 6 and $ 3,000 for children 6 to 17 years old.
Who is eligible?
The scope of credit has also widened, with children 17 and under covered. Previously, the child tax credit was limited to children 16 and under.
According to Fox Business, the amounts are reduced once income reaches $ 75,000 for individuals and $ 150,000 for married couples. Those above the income threshold may still be eligible for the $ 2,000 credit if their annual income is less than $ 200,000 for individuals and $ 400,000 for married couples.
How will the parents receive the money?
Half of the tax credit will be granted in advance payments during the year. Parents eligible for the Child Tax Credit will receive payments periodically from July 1 to December 31, 2021.
Families will likely receive monthly payments between $ 250 and $ 300 per child.
The IRS will establish an online portal where taxpayers can update information for mid-year adjustments (such as the birth of a child in 2021). The Treasury Department will also create a public awareness campaign to educate Americans about the program.
But that’s still a tax credit, isn’t it?
Yes, it is a tax credit. In fact, households eligible for the tax credit will receive direct payments for half of the money in advance. The rest of the money must be claimed on your 2021 taxes when you file next year, according to CNET.
For example, if you had a credit of $ 3,000 to claim, you would receive half of it in direct payments. You will then deduct the remaining $ 1,500 in your 2021 taxes.
Why direct payments?
Due to the pandemic, many families are still struggling. Lawmakers believed families could use the money sooner rather than later and chose to allocate some of the credit in the form of out-of-pocket payments instead of making them wait until they file their taxes next year. to get the full child tax credit.
Credits are fully refundable
The credit is fully repayable, which means low-income households “will be entitled to receive the full credit, as it has been significantly extended and increased by the US bailout”. Before, the credit was only partially refundable
Credit is also extended to Puerto Rico and the US territories.
Is it a one-off program?
For now, the changes to the child tax credit apply to the US bailout for 2021. However, President Joe Biden and other lawmakers are calling for the changes to become permanent in an effort to get families out. of poverty.
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