- The 2021 child tax credit will be different this year, with a larger deduction and cash available.
- Families could receive $300 periodically for each child under age 6, or $250 for ages 6 to 17.
- This year’s child tax credit also includes a deduction that will boost tax refunds in 2022.
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The 2021 child tax credit is expected to look different from that of previous years.
Authorized by the same legislation that created the third round of stimulus checks — the American Rescue Plan — the 2021 child tax credit will give a total of $3,600 per child up to age 6, and $3,000 per child between ages 6 and 17 (once President Biden signs off on the legislation this week).
This money will be available in two ways: half in periodic payments throughout the latter half of 2021, and half as a credit on this year’s taxes filed in 2022.
The child tax credit isn’t itself new this year — a similar tax credit has existed for many years. In its previous forms, it boosted refunds by up to $1,400 per child, but didn’t include any direct payments.
This year’s tax credit will include more, and put money in the pockets of American families who need a boost during the COVID-19 pandemic.
This year’s child tax credit includes regular payments and a tax break
This year’s child tax credit will include both a tax credit and an option for regular payments.
It’s different from previous years’ child tax credit in many ways:
- It’s larger in total: Previous child tax credits were $2,000 per child, with up to $1,400 available as a refund. The refundable portion of the new tax credit will be $1,500 or $1,800 per child, depending on age, adding up to a total of $3,000 or $3,600 per child including direct payments.
- It includes periodic cash payments: New for 2021 are regular payments of $250 or $300 between July and December 2021 to eligible families. The payments are optional, and if you don’t take them, your full credit will be available when you file your tax return in 2022, as Insider’s Tanza Loudenback reports.
- It includes 17 year olds: Previously, 17 year olds were excluded from the child tax credit. Now, that child would be included in the family’s tax credit.
- High-earning families won’t be eligible: Previously, the tax credit applied to any couple filing jointly with incomes up to $400,000 per year, or $200,000 for heads of households. But this year, many high earners won’t be eligible. The tax credit and monthly payments will only be available to those earning less than $150,000 as a couple, or $112,500 as a head of household.
- More low-income families will be eligible: Previously, the child tax credit was only available to those earning $2,500 per year or more. In 2021, there’s no minimum income requirement.
Right now, the tax break is only for 2021
This new structure for the child tax credit is only for 2021, as it’s currently written in the American Rescue Plan.
There are calls in Congress to extend the same child tax credit beyond 2021, Insider’s Joseph Zeballos-Roig reports. For now, however, there’s no guarantee for future years.
Source: Business Insider