There are many reasons why 2021 has been a difficult year for American families. In addition to its devastating effect on public health, the coronavirus pandemic has imposed severe financial hardships on many, particularly those raising children. With that in mind, it is not surprising that I have been receiving a lot of questions recently about what options are available for families seeking financial relief. Thankfully, a new federal law offers a much-needed break in the form of an expanded child tax credit to those eligible.
On March 11, 2021, the American Rescue Plan Act was signed into law by President Biden. An important provision of the new law involves temporary changes to the child tax credit. For the 2021 tax year only, the credit has been increased from $2,000 to $3,000 for each child age six or older. For children age five and younger, the credit has been further increased to $3,600.
Even more encouraging is that you may not have to wait until you file your 2021 taxes to start benefiting from the savings. If your 2020 taxes were filed by May 17, 2021, you can receive half of the amount owed in advance by receiving periodic checks in the mail beginning in July and ending in December.
The age for eligibility has expanded as well. For the 2021 tax year, children qualify for a tax credit up to age seventeen. Normally, the maximum age is sixteen. Other tax credit requirements remain unchanged though. The child must still provide less than half of their own financial support, be claimed as a dependent, live in your residence for at least half the year, and be a United States citizen with a social security number. In addition, the minor must be either your biological child, adopted child, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of those people. The increased child tax credit does not apply to individuals with high incomes or those who owe zero in taxes.
If your earned income is greater than $2,500 and your Child Tax Credit is more than the total amount of your tax bill, then you can claim up to $1,400 of your remaining Child Tax Credit as a refund even if you do not owe any taxes. However, you must file a tax return to receive this refund. You will need to fill out this form https://www.irs.gov/pub/irs-pdf/f1040s8.pdf.
It is important to keep in mind that this tax advantage is only being offered once for a limited time. If you are wondering if you qualify, contact Fogt Law Office to discuss taking advantage of this valuable financial opportunity.