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Sunday, April 18, 2021

The Child Tax Credit For 2021: Parents Who Qualify, Income And Age Limits, And Other Rules That Count

The requirements for the Child Tax Credit are a bit detailed and complicated. But you need to know each of them, as the IRS starts dispatching the checks in a few weeks. This move is expected to significantly increase the income of American households and lift many families out of severe economic hardship. It will benefit families even more than the stimulus checks.

The Child Tax Credit has been increased a lot since the last year. Parents could qualify for as much as $3,600 for each child, expected to go out in a succession of payments till the end of 2021, and hopefully also in 2022. As many as 9 out of 10 American children will benefit from the payments.

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Tens of millions of families are expected to gain from this amount that will be above the $1,400 max that families have already received as stimulus payment. But unlike the stimulus check, the Child Tax Credit payment is expected to be given several times through December 2021.

But many details remain unfamiliar to most Americans including who is eligible for the payments and what exactly will it add to the total amount received.

The CTC has been much increased due to the economic impact of the COVID-19 pandemic. It has resulted in the loss of millions of jobs, closed businesses, and a struggling economy.

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The payout is expected to be as high as $3,600 for caregivers and parents of a child aged 5 or lesser. So if you are the parent of two children aged below 5, you can expect as much as $7,200. For children between 6 to 17, the Child Tax Credit is $3,000. There are a few more qualifications to be eligible for the child tax credit checks.

The Child Tax Credit Age Slabs 

If you are the parent or caregiver of children aged between 6 and 17 and meet other income requirements for qualification, you will get $3,000 per child. This also includes dependents if they are below 17.

child tax credit
Child Tax Credit

This segment of the stimulus payment has seen a great increase this year, up from the $2,000 paid last year. The upper limit too was lower at 16 years last year. Parents of kids older than 18 will also get a Child Tax Credit check, though the amount will be much lower at $500. The same amount will be given to regular college-going children between 19 and 24.

Rules For Child Tax Credit For Separate Categories

The income rules are the same for CTC payment and the third stimulus check. Individual tax filers with an Adjusted Gross Income of $75,000 will get the maximum amount of either $3,600 or $3,000 for each child, depending on their age. For the heads of household, the corresponding amount is an AGI below 112,500. 

For couples filing jointly, the Adjusted Gross Income should be $150,000 or less to be eligible for the maximum CTC amount. Only one parent can claim the CTC for a given child in a year, for parents who share custody of a child. You still have to repay the full amount if you claim it incorrectly.

In the previous year, you did not have to give back overpayments to the authorities.

The maximum amount is $3,600 for kids below the age of 5. This also includes children born later this year. The parent or individual filer has to update this information on the IRS site to start receiving CTC checks this year.

Parents can also file for the amount in 2022, as part of their tax returns for 2021. However, there might be more information coming in from the IRS, before you receive the check in hand. We are still to get an exact timeline for the payment of the CTC.

If you are an individual taxpayer, you will get a maximum of $3,600 for a child below 5 only if your income is below $75,000. The amount will be phased out and anyone earning above $80,000 will not receive any amount under the Child Tax Credit. The check amount will be $3,000 for children between 6 and 17.

The AGI has to be below $112,500 to receive the full amount of either $3,600 or 3,000. It will phase out above that and the Child Tax Credit will be zero for earnings of $120,000 and above. For married couples, the income has to be below $150,000 for the maximum payment and between $150,000 and $160,000 for at least a partial check.

Criteria For Child Tax Credit

Even if you happen to be a non-filer, people who are not required to file their tax return for various reasons, you will have to file a tax return for 2020 this year before the May 17 extended deadline. For people who file the tax returns within that date, the Child Tax Payment will be automatic, said Charles Rettig, the IRS commissioner. The IRS will base your payment on the tax return, so you must file your returns immediately.

There are some important additional rules for parents to qualify for the Child Tax Credit. The child for whom you are claiming the check should stay with you at least for half of the year.

The rules are different when it comes to matters of citizenship. To qualify for the payment, your child and you should be American citizens.

To qualify, one spouse at least should have an ITIN number or a Social Security number for couples who are filing jointly. But the child will not be eligible if they have an ATIN number, the Social Security number is mandatory. Parents who have joint custody of a child will not get any tax credit.

The CTC payment this year will not be offset for previous child support dues. But if the same amount is claimed as part of a recovery Rebate Credit in the tax returns filed in 2021, the payment could be garnished to cover the previous debt.

Were The Rules Different Last Year?

child tax credit
Child Tax Credit

The rules of the American Rescue Plan were changed this year. Previously people who claimed the tax credit for their children could only do so as a deduction from their taxes. Only non-filers were exempt from the rule.

But this year even files who have declared zero income will qualify for a payment and receive the full Child Tax Credit. Families will get 50% of the credit in 2021, and the rest when they file the tax return for 2021 in 2022. However, you can choose to get the full amount in 2022.

More than 90 percent of all United States families that have children – from the lowest to the highest income amount that qualifies – will be receiving $4,380 worth of benefits on average.  Reports by the Center for Tax Policy supported the claim. Half of the total amount will be sent out in the current year periodically. The payments will start this summer in approximately equivalent amounts. The remaining half will be paid next year on filing the taxes.

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