fbpx
5.8 C
London
Wednesday, December 1, 2021

The 2021 Child Tax Credit Payments Are Expected To Be Monthly: Get The Calculations Right

Calculating your Child Tax Credit It isn’t as simple as your stimulus check. The rules are a bit complicated for both parents and their children. Knowing a few details before the IRS sends out the check should help you out.

The new Child Tax Credit for 2021 will bring in a maximum of $3,600 for families of children. Tens of millions of families are expected to profit from the scheme. The money will go out starting July 2021 and is expected to continue into the next year. And the government has been generous in this regard.

- Advertisement -

Adding the CTC payment to our stimulus check is expected to substantially add to your earnings. The amounts have been increased considering the effect the pandemic has had on the economy. But the details are a bit confusing on the frequency and the duration of the payments.

The Child Tax Credit Is $3,600 If Your Child Is Under 6

The maximum amount of $3,600 is if your child is under the age of 6. And your child qualifies till the age of 17, though the amount is a bit lower at $3,000. The periodic payments from July 2021 through December 2021 will give you half of the credit as an advance to the eligible families or caregivers. So a family with two children under 6 could finally expect as much as $7,200 just as advance for CTC, though you will get only half of the amount by December 2021. The rest will be as tax refunds against the returns filed in 2022.

You Get $3,000 If Your Kids Are Above 6 Years

Child Tax Credit
Child Tax Credit

You still get as much as $3,000 if you have dependents between 6 and 17 years. The original CTC paid out last year was a maximum of $2,000 for children aged 16 and below.

- Advertisement -

There are also provisions if your kids are older than 18. You can claim $500 for them. You also get the amount if your kids are in college and are aged 19 to 24.

But these maximum figures will go out if you meet the criteria for income as individuals and families. The calculations are based on the AGI declared in tax returns filed for either 2019 or 2020.

For individual filers, the AGI should be $75,000 or below to qualify for the full amount. The Child Tax Credit, like the stimulus check, will phase out for every increase in earning above this threshold limit.

The corresponding figures are $112,500 and $120,000 for the head of household and AGI between $150,000 and $160,000 for married couples who file jointly.

The credit begins phasing out after the limit set for the maximum amount. It decreases by as much as $50 for every increase of $1,000 in income above the threshold for all the three categories of tax filers.

It is very important to note that the phase-out is limited to the temporary increase of $1,600 above the $2,000 in case of kids below six. It is $1,000 above the $2,000 for children aged between 6 and 17.

For instance, a couple having a 4-year-old and earning $160,000 will have their credit reduced by $50 for each year. So they get $3,100 after the reduction of $500.

The Child Tax Credit Is Also For Those Born In 2021

Your baby also gets the same amount even if born in 2021. But you need to update that piece of information with the IRS. The easiest way is through the IRS portal which allows you to update dependent information. You can start receiving the CTC when they are sent out.

But if you miss out on filing this information, you can still claim the total amount as part of your 2021 tax returns filed next year. But the

IRS has not yet set a precise date for getting the portal ready and running.

Can A Child Tax Credit Still Come For Non-Filers?

Even if you do not have to regularly file tax returns, you will have to file this year, to qualify for the 2021 Child Tax Credit. If you file the 2020 tax return by May 17, you will receive your payment automatically. The IRS will need to get your details through the returns to start sending you the amount.

Filing the tax returns this year will also let the IRS get information about any dependents added to your family the past year. So you will get the full amount of the Child Tax Credit for which you have qualified.

Are There Any Other Qualifications For Getting The CTC?

There are a few more requirements for a family to qualify for the CTC. The child should have stayed with you for at least 6 months a year. Further, you and your child should both be US citizens. Mixed-status households do not qualify for the Child Tax Credit.

In the case of married couples, at least one spouse should have a Social Security number or at least an ITIN. The child should also possess a Social Security number. Children having ATIN do not qualify. The rule applies also to adopted children.

If you share custody of a child, you and your spouse do not both get the CTC.

What Is The Split Payment System For The Child Tax Credit?

child tax credit
Child Tax Credit

One of the reasons that complicate the calculations for the Child Tax Credit is the split payment system. You will receive half of the tax credit in periodic payments from July through December. It could be monthly but we are not sure yet as the IRS has yet to give definite answers regarding that.

The other half of the payment will be in the form of tax refunds for returns filed for 2021 in 2022.

You would lose out on the higher amount of $3,600 if your child turns 6 before December 31, 2021.

What Does Full Refundable Mean For The Child Tax Credit Of 2021?

The child tax credit has been made fully refundable for those who live in the US for more than 6 months in a year. Previously a person could expect only $1,400 instead of the maximum $2,000 allowed last year if their child credit was more than the tax they owed. But for 2021, the full amount, either $3,600 or $3,000 will be allowed even if they have zero tax liability.

The other significant change is that parents do not need to be employed to qualify for the child credit. Families had to earn at least $2,500 to qualify for the Child Tax Credit last year.

How Does The IRS Calculate For Increase In Income After The CTC Payments Are Sent Out?

Any increase in earnings can be updated on the IRS CTC portal the agency will soon make available. The IRS will immediately lower your payment accordingly. Or you could wait till you file your tax reruns next year and update that information. You will either get a smaller amount, or you will have to refund the excess amount. The IRS CTC portal is expected to be launched before July 1.

- Advertisement -

Follow Us

16,985FansLike
4,865FollowersFollow
1,643FollowersFollow

Latest news