The child tax credit is expanded in 2021. Here are five things to know:
The child tax credit for 2021 is $3,000 per child or $3,600 per child if the child is 5 years old or younger at the end of 2021. This credit was just increased beginning in the 2018 tax year from $1,000 to $2,000. Now it has been increased again.
Instead of taking all of the credit when you file your 2021 tax return, up to 50% will be paid out in advance periodic payments from July to December.
The amount you will receive could be reduced based on your modified adjusted gross income. The increase in the child tax credit over prior years ($1,000 or $1,600 for younger children) will phase out starting at $150,000 of modified AGI for joint taxpayers. The original $2,000 child tax credit phaseout starts at $400,000 of modified AGI for joint taxpayers like it did in 2020. Income limits vary based on filing status.
There will be an online portal to update your information (like number of children) and to opt-out of the periodic payments if desired.
For now, the increase in the child tax credit is for 2021 only but there have been pushes to make it permanent.
Interesting Article(s) or Video(s)
Kiplinger - 2021 Child Tax Credit Calculator
Much of the information above came from this article. Also, they have a calculator that attempts to estimate your tax credit. The tax credit will be reconciled on your 2021 tax return. Therefore, the calculator doesn’t necessarily tell you the final benefit. In other words, generally speaking, if you were paid too high of an advance based on your 2021 income then your tax will be increased to “pay back” the credit. There are some exceptions to this pay back.
Information on the expanded child tax credit straight from the IRS.
Thank you for reading!
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