is already underway with already sent out by the IRS (here’s ). Another major component of the legislation is an increase to the Child Tax Credit (CTC), which could provide families up to $3,600 per child. However, the IRS says it might take some time to deliver the money.
IRS commission Charles Rettig said there could possible delays on the expanded CTC during a House Ways and Means Committee hearing Thursday, according to the Washington Post. He explained the agency is bogged down with a backlog of tax returns. While Rettig didn’t give a timeframe of when funds from the CTC would go out, he said the agency would “do our best.”
The IRS moved Tax Day from the working on guidance about the CTC.to allow filers to make use of the benefits from the American rescue plan such as the CTC and the unemployment insurance tax benefits. In a statement last week, the agency said it’s still
The expanded credit was made official after Biden signed his report from the Center on Budget and Policy Priorities.. Families could receive more funds if they qualify. Once the CTC is in full effect, it could reduce child poverty by 40%, according to a
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 is the Child Tax Credit?
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 the new 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 CTC 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 Credit last? Is it 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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