The Child Tax Credit offers a credit of up to $3,600 per child under the age of 6 and $3,000 per child between the ages of 6 and 17 for 2021. Families may obtain a refund for any surplus funds if the credit surpasses the amount of taxes due. In addition, instead of being paid out in full at tax time, the credit will be made accessible every quarter beginning as early as July.
Prior legislation offered a Kid Tax Credit of up to $2,000 per child, up to the age of 16, with a maximum refund of $1,400 per child. These restrictions will be in place once more from 2022 to 2025. A nonrefundable credit of up to $500 can be given to other dependents, such as children under 18 and full-time college students between the ages of 19 and 24.
Today’s Child Tax Credit System
The Child Tax Credit (CTC) was enhanced by the American Rescue Plan for 2021. Taxpayers may claim a CTC of up to $3,000 for each kid aged 6 to 17 and up to $3,600 for each child under the age of 6. A filer who has many children may obtain an unlimited amount of credit in total.
Low-income families are eligible for the maximum credit regardless of their income because the credit is completely refundable. Families may get a tax refund if the credit surpasses the amount of taxes due. These advantages are only available to children who are citizens of the US. Credit expires in two stages.
First, the credit’s value starts to decline at $112,500 of income for single parents ($150,000 for married couples), and it continues to do so until it hits pre-2021 levels at a rate of 5% of further modified gross income. Second, the amount of the credit is further decreased by 5% of the first $200,000 for single parents (or $400,000 for married couples) of adjusted gross income.
The credit is scheduled to return to its pre-law levels in 2022. The Tax Cuts and Jobs Act (TCJA) of 2017 set those regulations, which allowed taxpayers to receive a CTC of up to $2,000 for each child under the age of 17.
Details for Parents and Other Filers
If a parent is a single parent, their credit would be reduced by 5% of their adjusted gross income beyond $200,000 ($400,000 for married couples). The extra child tax credit (ACTC), also known as the refundable child tax credit (CTC), allows taxpayers to obtain up to $1,400 in tax refunds if the amount exceeds taxes due.
However, the ACTC would only be available to filers with incomes over $2,500 under the TCJA criteria, which would prevent them from claiming the credit or would only allow them to claim a credit of a lower amount.
Any dependent who is not entitled to the $3,600 or $3,000 credits for children under the age of 18 (or under the old legislation, the $2,000 CTC for children under the age of 17) may instead claim a $500 credit under the TCJA.
These people would have qualified for a dependant exemption before 2018, but the 2017 Tax Cuts and Jobs Act removed it, thus they would not have been entitled to a CTC (TCJA). Children under the age of 18 (and under the TCJA’s criteria, under the age of 17) and children between the ages of 19 and 24 who attended school full-time for at least five months of the year qualify for this credit as dependents.
The $500 credit, known on tax forms as the other dependent credit, is available to older dependents (who account for roughly 6% of dependents qualifying for the CTC) as well as certain children who are not US citizens. After the TCJA expires in 2025, the CTC is expected to return to its pre-TCJA state.
What Is The Child Tax Credit US Calculator?
Since July, millions of families have received up to $300 per kid every month in child tax credit payments. If Congress does not approve the Build Back Better proposal, the monthly payments will stop in December.
The amount of your child tax credit depends on your income, the age of your kid, and the number of dependents you have. Your monthly payment will be calculated by the Internal Revenue Service (IRS) using either your 2019 or 2020 tax return, depending on which was filed most recently, or the data you submitted into the IRS non-filer tool. To see how much you and your family may get, you can use an online tax calculator.
Result of the CTC
According to the Tax Policy Center, in 2021, 92 per cent of households with children will receive a CTC with an average of $4,380. 89 per cent of households with children received an average CTC of $2,310 under the previous law. Average credits were reduced for all income levels, but especially for the families with the lowest incomes.
