In the latest slam-dunk by the Biden-Harris Administration, the Child Tax Care Credit, part of The American Rescue Plan, will provide the most tax relief in history for working families. This comes at a time when parents are in need more than ever. There is a lot to this tax credit, and we have the answers to many of your questions.
Scary Mommy spoke to Kemberley Washington, tax analyst of Forbes Advisor, and she gave us all of the details about the new tax credit and how the program works.
How do I know if I qualify for the child tax credit?
In order to receive the full payment, your modified adjusted gross income (MAGI) is $75,000 or less for single filers and $150,000 or less for those filing jointly. If your MAGI is more than these amounts the IRS will give payment in two phases.
In the first phase, your child tax credit is lowered from $3600 for children 5 and under and $3000 for children 6 to 17, by $50 per $1000 earned over the qualifying threshold. No matter how much you earn over the threshold, your credit cannot be lowered to anything under $2000. For those earning more than $200,000 for single earners and $400,000 for married couples, the credit is reduced by $50 for every $1000 earned.
There are also criteria that must be met in order to be eligible for monthly payments. Those include:
- You child must be claimed as your dependent on your tax return and related to you
- Your child must be a US citizen, national or resident alien, and 17 or younger
- You child must reside with your for half of the year and have a valid social security number
- Half of their financial support must come from you
How much will I receive?
You can use this calculator to determine the potential amount that you will receive. The total depends on your income and the qualifying number of children and their ages. Children 5 and under can expect to receive up to $300 per child and children 6 to 17, up to $250 per child.
Do I need to fill out an application or do anything else?
In most instances, the IRS will simply use your most recently filed tax return, typically 2019 or 2020. You can also register for the monthly tax credit payments, if you are not required to file a tax return, here. This will help to determine your eligibility.
What about next year’s taxes — will I need to repay?
This tax credit is an advance, so if the payment exceeds the amount you qualify to claim on the 2021 tax return, you may be responsible to pay some or all of it back.
“For example, let’s say you claimed three qualifying children on your 2020 tax return, but for 2021, you are only able to claim one qualifying child. If you don’t adjust your child tax credit payment status in the IRS portal (more on that below), you may need to repay the credit to the IRS when you file your 2021 return,” Washington said.
But don’t fret; the IRS has a safeguard in place for some taxpayers. Here is how that works. If you lived mainly in the US for more than half of the year and your MAGI is at or below the following, you will not need to pay any money back:
- $60,000 if you are married filing jointly or a qualifying widow or widower
- $50,000 if you are a head of household
- $40,000 if you are single filer or married filing separately
In some cases if you may be required to repay the credit. If your MAGI is above the following thresholds, you don’t qualify for repayment protection at all.
- $120,000 if you are married filing jointly or a qualifying widow or widower
- $100,000 if you are a head of household
- $80,000 if you are single filer or married filing separately
How will I receive my child tax credit payment?
If the IRS has your banking information on file, the child credit tax payments will come either by check or direct deposit. The IRS can attain your banking info from the following sources:
- Your most recently filed tax return 2019 or 2020
- Any information you provided using the non-filer tool
- Any Federal Agency such as the Social Security Administration, Department of Veterans Affairs or the Railroad Retirement Board
Are these payments taxed monthly?
Nope, there are no monthly taxes to worry about.
So there you have it. It’s a lot of info, but it is well worth the read. This credit could mean a big difference to many American families. Thank you to President Biden for again looking out for the American people. You are helping us at a time when we need it most.
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