Americans with children under 18 years – there is some good news for you! The Senate voted to pass the $1.9 trillion American Rescue Plan Act. Now you must be thinking how this can be beneficial for me! This act includes the provisions that increase the child tax credit to $3,000 per child for age range between 6 and 17 and $3,600 annually for children under 6 for the tax year 2021.
What this Act Offers?
● The Child Tax Credit provision under American Rescue Plan Act offers full credit to individuals with children and adjusted gross income of less than $75,000, or $150,000 for a married couple filing jointly.
● The extra benefit will phase out for those taxpayers who make more money and cease for individuals earning $95,000 and married couples earning $170,000 filing jointly.
● For taxpayers making more money than that will be eligible for the regular child tax credit that is: $2,000 per child under age 17 for families making less than $200,000 annually, or $400,000 for married couples.
A Few Facts to Know About the Act
● This expanded credit has been planned to be disbursed to families on a monthly basis starting in July which will continue through December 2021.
● Typically, the monthly amounts will be $250 for older children and $300 for children under the age of six.
● Families will be able to claim the residual half of the credit after filing their income tax return for 2021 in 2022.
● No limit is there on the number of children in a family that can receive the credit as long as they meet age and income eligibility requirements.
● For receiving the credit, families with children need to file a 2020 tax return says, Rettig. In case a family fails to file a 2020 return, the agency won’t be able to deliver the credit due to a lack of information.
The Importance Of The Child Tax Credit (CTC)
● The child tax credit (CTC) is one of the most important components of the plan for lifting millions of children out of poverty. If you have a family of four and income is less than $150,000 you can get more than $14,000 in pandemic relief this year from the extended child tax credit and $1,400 incentive checks to both adults and children.
● It has been anticipated by the Institute on Taxation and Economic Policy that around 83 million children living in households would get benefitted from the extension of the CTC. Moreover, 20% of the poorest families would see an increase in income by more than 37% during the year in which the policy is in place.
The drawback of the Act
The only drawback of this act is that it expands only the credit for one year and after 2021 it will cease. Also, families will notice a smaller boost to their income unless further legislation is passed to continue.
If you want to learn more about the American Rescue Plan Act or the Child Tax Credit (CTC) in detail, you can consult with our expert Certified Public Accountant at Foster Financial. Our firm provides exceptional services to our clients as we believe in and follow the three underlying principles of professionalism, responsiveness, and quality.