Do you have children or dependents who are under 17 years of age? Well, then you are likely to qualify for Child Tax Credit.
This credit comes as a boon to taxpayers as it reduces your federal income tax bill by up to $2,000 per child for the 2020 tax year. In 2021, the American Rescue Plan — passed to help in recovery from the COVID-19 financial turmoil — expanded the child tax credit and makes it available to even more Americans.
The Child Tax Credit is one of three child-centric federal tax credits that are among the most efficient ways to minimize your tax bill. At a basic level, the Child Tax Credit is a credit that parents and caregivers can claim to aid in diminishing their tax bill, subject to the number and ages of their dependents.
The following are ineligible for credit payments i.e., caregivers who are:
Bear in mind that eligible expenses can go over and above physical care and household expenses such as domestic help or paying someone to cook.
The process: How do I apply for child tax credit?
You will be able to procure your tax credit through Form 1040, U.S. Individual Income Tax Return, Form 1040-SR, U.S. Tax Return for Seniors or Form 1040-NR, U.S. Nonresident Alien Income Tax Return.
On 6th March 2021, the Senate voted to pass the $1.9 trillion American Rescue Plan Act, embracing provisions that up the child tax credit to $3,000 per child ages 6 to 17 and $3,600 yearly for children under 6 for the tax year ending 2022.
The American Rescue Plan will give more money to families for the time being. Here's everything that changes:
Another refundable tax credit that the working families and individuals can avail is the Earned Income Credit. The families with children have the advantage of receiving larger credit than the ones without.
The earned income credit, or the earned income tax credit (EITC) was set in motion to keep families out of poverty while invigorating the public to work. The EIC is only applicable to low-income earners and some middle-income families.
Moving onto 2021 taxes, these figures will change slightly.
You may claim the EITC if your income is below $57,414. However, the amount of your credit may change based on factors like having children, dependents, or are disabled.
The Child Tax Credit is an existing beneficiary program that decreases the tax burden of families with dependent children. For the 2021 tax year, the program has been expanded to give bigger checks to parents, pulling kids out of poverty, allowing more of the credit to get refunded and enable families to get an advance on their refund in the second half of this year.
We'd also suggest reading up on our article how to file your taxes the right way and get better savings and better outcome.
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