The Child Tax Credit has been in flux recently. In 2021, both the amount of the credit and the timing of when the credit was received changed. There was an expectation a law would be passed to make this change continue (at least for a few years) but what actually happened?
In 2021, the American Rescue Plan expanded the child tax credit to $3,000 for children age 6 to 17 and $3,600 for children under the age of 6 at the end of the year (subject to income-based phaseouts). Generally speaking, one-half of the amount individuals were eligible for was to be paid in equal monthly payments from July 2021 through December 2021. Individuals should be receiving a letter (called Letter 6419) from the IRS that says how much child tax credit they have already received. Taxpayers will use this letter to reconcile the credit when they file their 2021 tax return.
While the Child Tax Credit was expected to be extended, it has not at the time of posting this (1/17/22). Therefore, at this point, the child tax credit has reverted back to $2,000 and the monthly payments are supposed to stop as well.
For families with children, this is a pretty significant change. A young family with three kids under 6, will pay $4,800 more in taxes than they would have had it been extended (assuming they are under the income limitations). It is definitely still possible that the expanded child tax credit is still extended but at this point, for conservative sake, I wouldn’t plan on it in your cash flow.
Interesting Article(s) or Video(s)
A Wealth of Common Sense - Updating My Favorite Performance Chart for 2021
Ben shows an asset allocation quilt chart over the last 10 years. It is a visual representation that shows the volatility among asset classes.
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