$3,000 Child Tax Credit For 2021
Today, I’m going to talk about the $3,000 child tax credit for 2021. This credit was a part of the $1.9 trillion stimulus package that Biden passed this month. It’s a bit confusing, but it all stems down to how you qualify, who qualifies, and what your adjusted gross income is.
For your 2020 tax returns, that have been extended to May 17th of this year in order to file on time, this only includes a $2,000 credit for each child. Now, this does come with certain limitations. For 2020, the following year, the tax credit is worth $2,000. This is for any child, 17 years or younger and can be claimed as a dependent. To qualify the child must be a relative and live with you for at least six months of the year.
Who Can Qualify for the Tax Credit
The credit begins to phase out if your adjusted gross income is above $400,000 on a joint return and over $200,000 for single head of household. You’ll be able to get up to $1,400 of a child credit refundable for lower-income individuals who have children. However, these people must also have an earned income of at least $2,500 in order to get this refund. So you got to make at least $2,500 to even qualify to get the child tax credit. And then if you’re earning $400,000 as a couple or $200,000 as an individual, then you also will qualify. Anything above those limits of your adjusted gross income you will start to phase out of the child tax credit.
The American Rescue Plan has temporarily expanded the credit for 2021. 17-year-old dependents can qualify. Second, the credit is to increase it up to $3,000 a child and $3,600 per child under the age of six. So you’ll get $3,000 if you’re 6 to 17 and $3,600 if you’re six below. Third, they removed the $2,500 minimum earnings floor to receive the credit in 2021.
Advanced Tax Credit Payments
Oh, and this is the fun part. Half this credit can be received in advance by having the IRS start periodic payments in July. Let me break this down of how these periodic payments work. Regarding the advanced payments, the American Rescue Plan calls the IRS to send a check mainly in the form of a direct deposit periodically from July 2021 through December 21 to these eligible families. The hope is that the IRS will send these payments monthly for a total of six advanced payments. These payments would account for half of the family’s 21 child tax credit.
For example, monthly payments of up to $250 per child, $300 per child under the age of six are possible. For six months it would be a nice windfall for some families to get so they don’t have to wait all the way until next year to receive this credit.
Take a family of five with three children; ages 12, seven, and five. Assuming the family qualifies for the higher child tax credit and doesn’t opt out of the advanced payments, they could get $800 a month from the IRS from July through December for a total of $4,800. They would then claim the additional 4,800 in child tax credits when they filed their 2021 tax return … What you need to do in order to make sure exactly what each individual payment you qualify for is to go online and just type in 2021 child tax calculator. And in that it’ll allow you to put in the ages of your children, your income, your adjusted gross income, and then it will calculate out for you exactly the advanced payments that you should be receiving from July to December. Because everybody’s going to get it different, I can tell you that.
Step 1 For Receiving the $3,000 Child Tax Credit
The first thing you want to do is file your 2020 tax return. Also, make sure you at least get it done by May. Reason being is that if you get it in and you have direct deposit information on your tax return, it’ll make it easier for the IRS to be able to give you these advanced payments starting in July.
If you file and don’t have a refund, I would still suggest going to the IRS website; www.irs.gov, and filing a $0 tax return. You’re just going to fill out zero, zero, zero, zero, because you’ve already had your tax return. But, that’ll allow you to put in your direct deposit information and then they’ll have it on file. So then you don’t have to wait around for months possibly to get an actual check or the debit cards, which they’re sending out now.
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