Tax Time: What Is the 2021 Tax Credit
After holiday season comes tax season and instead of presents, we’ll be waiting for W2s. In 2021, most Americans received a third stimulus check and parents began receiving an advance of the Child Tax Credit in July.
With tax season looming, you may wonder what this credit is and how it will affect your taxes. Continue reading to learn all you need to know.
What is the Child Tax Credit?
The Child Tax Credit is part of the American Rescue Plan. The government enacted this credit in response to the pandemic to provide relief to working families in the United States.
Fifty percent of this 2021 tax credit has already started going out to families as advance monthly installments. The remaining amount will be a credit on your 2021 taxes.
This tax credit gives families extra funds for groceries, child care, and educational costs. This allows the rest of your tax refund to go towards other necessities.
Do I Qualify?
To qualify for the 2021 tax credits, you must have a child in your household aged 17 or under. Your child must have a valid Social Security number and spent more than half of the tax year living with you.
In addition, couples must make no more than $150,000 annually while single-parent families can make up to $112,500 per year to receive credits.
If you’re unsure whether you qualify, you can check your eligibility with the IRS.
How Much Will I Get?
The amount you will receive under this plan varies based on the age of your children and how many you have. Parents with children under the age of six will receive $3,600 per child. Those with older children up to 17 will receive $3,000 per child.
Half of the tax credit will be issued in advance in monthly increments. Those with younger children will receive $300 per month, while parents of children between 6 and 17 will receive $250 each month.
How Do I Get Paid?
If you filed for 2019 or 2020 taxes, or filed for the stimulus relief, the funds are automatically sent. If you have a direct deposit set up for your taxes, the money will be deposited into your account each month. Otherwise, you will receive a paper check in the mail.
The remaining portion of the tax credit will appear with your 2021 tax refund. If you would prefer a lump sum for the full amount, you can opt out of the advance monthly payments.
What if I’m a Non-Filer?
You’ll still qualify for the Child Tax Credit even if you did not earn enough to file taxes. As a non-filer, these benefits will not go to you automatically and you will need to sign up to receive them.
Understanding the Child Tax Credit
Understanding what the Child Tax Credit entails will help you prepare as we get closer to the 2021 tax season. There are a few ways this credit goes out, based on how your family files and whether you opted for the monthly advance payments.
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