Millions of Americans are poised to receive a, totaling as much as and arriving (here’s ). his into law Thursday after negotiations completed in the House and Senate. Besides the $1,400 stimulus checks, included in Biden’s American Rescue Plan is an expanded Child Tax Credit.
Here’s everything you need to know about the CTC, including, how much money you could get and whether the benefit will become permanent. (Here’s every way .)
What exactly is the Child Tax Credit for?
At a basic level, the Child Tax Credit is a credit that parents and caregivers can claim to help reduce their , depending on the number and ages of their dependents. For many, it may provide a much-needed source of relief as part of a .
Previously, the CTC was a $2,000 credit parents could claim on their taxes for every child under the age of 17 (the same age range for that was used for the first and second ). And if that credit exceeded the amount of , parents could still receive up to $1,400 of the balance as a refund; this is technically referred to as the Additional Child Tax Credit or refundable CTC. For example, a married couple with children ages 5, 10 and 12 would receive a total child tax credit of $6,000 — unless they were , in which case they’d receive $4,200.
What’s changing under Biden’s plan?
will temporarily give more money to families. Here’s everything that changes:
- Credits increase from $2,000 to $3,600 per child under 6 and $3,000 for children older than 6.
- The credit would also be fully refundable.
- Money from the credit will be split: Half will be paid through the tax refund and the other half will be paid monthly from July to December.
- There is no $2,500 earnings floor.
- Families in Puerto Rico can receive the credit.
Am I eligible for the Child Tax Credit?
Families with kids under 6 will receive up to $3,600 per child under the new. Families with children aged 17 and under will receive a credit of $3,000 per child. Families with older kids are also eligible: You can claim $500 for each child aged 17 and 18, or for full-time college students between the ages of 19 and 24.
The tax credit applies to children who are considered related to you and reside with you for at least six months out of the year.
Note that though the eligibility requirements are relatively broad, higher-income families may receive a reduced credit. But married couples filing jointly with an adjusted gross income under $400,000 are eligible for the full amount, as are individuals with anunder $200,000.
The size of the credit will start to phase out for single people earning more than $75,000 a year, heads of household earning more than $112,500 a year and married couples earning more than $150,000 a year.
Will the Child Tax Credit be based on my 2019 or 2020 tax return?
It will likely depend. The IRS will be tasked with basing your eligibility for the Child Tax Credit on your, if that’s been processed by the first July payment. Otherwise — in the case of a , for example — the agency would use your 2019 taxes to determine the amount you’re owed.
How long will the new Child Tax Credit last? Will it be permanent?
The Child Tax Credit for 2021 is considered a temporary reprieve for the year and would last only through 2021. Any changes to a 2022 CTC would need to take place in a separate bill.
For more information, here’s, when the and how to . Here is also how to and what we know about using .
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