Do you have questions about the child tax credit, who is eligible to receive it, and the impact it could have on your tax liability? You’re not alone. For this blog post we wanted to break down some of the most common FAQs.
When does it start?
Eligible households likely received their first payment on July 15th. Some parents received their payments via direct deposit (depending on whether the IRS has your bank info), whereas others received paper checks.
The payments are scheduled to be dispersed monthly (in six installments) and taxpayers can claim the other half when they file their 2021 tax return.
How does it work?
The credit is granted to taxpayers who have qualifying dependent children who are under the age of 18. For tax year 2021, the credit is $3,000 per child (under the age of 18), and up to $3,600 for children under the age of 6.
All families will receive the full credit if their 2021 joint returns have an AGI of $150,000 or less. Single parents who file as head of household, will receive the credit if their AGI is $112,500 or less, and single filers must have an AGI of $75,000 or less. Some filers who have AGIs above these thresholds may still be eligible to receive payments, although their payments will be reduced.
Keep in mind that the payments you receive in the last half of 2021 are based on the income you reported on your 2020 tax returns. If your household income increased in 2021, and you exceeded the income threshold, you could wind up owing money to the IRS when you file your taxes.
Parents who are concerned about potential tax liability can “opt out” of the advance payments and claim 100% of the child tax credit when they file their 2021 taxes. Additionally, those who don’t opt out can get 50% of the credit in advance (in the form of monthly payments), and claim the latter 50% when they file their 2021 taxes.
Tax matters can be confusing, and lots of families have questions about the child tax credit, how it works, and the ramifications it could have on their 2021 taxes. For more information or to learn how advance payments could impact your refund (or what you owe), we can help. Call Hughes, Snell & Co., PA today to speak with a reputable expert. Call us today at 239-939-2233 to get started.