Child Tax Credit Calculator: Find out how much the new $3,000 Child Tax Credit could be worth to you
When Joe Biden signed the $1.9 trillion "American Rescue Plan" into law on March 11, headlines heralded the third wave of stimulus checks that recently hit American bank accounts. Families with children got some good news in the form the Child Tax Credit.
The latest $1.9 trillion Covid-19 relief package expands and enhances the child tax credit. Under the new provisions, families are set to receive a $3,000 annual benefit per child ages 6 to 17 and $3,600 per child under 6 in the tax year 2021.
The credit will be fully refundable. Right now, if taxpayers’ credit exceeds their taxes owed, they only can get up to $1,400 as a refund. Under the new rules, they could receive the full $3,000 or $3,600 per child, depending on the child’s age.
The new enhanced benefits, which specifically cover teens who are 17 for the first time, are income-based and would start to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly.
Families who are ineligible for the new $3,000 credit because they earn higher adjusted gross income are still able to claim the $2,000 per child tax credit, which is available to those making up to $200,000 ($400,000 for married couples filing jointly).
Another change: You don’t have to earn an income to get the credit. This is a departure from the previous rules, which required households to earn at least $2,500 in a given tax year to qualify.
How much you receive is based on your 2020 income. If you’ve yet to file your 2020 return by the time you begin to receive the credit in the form of advance payments, the IRS will use your 2019 return information.
To help estimate how much families stand to gain under these new rules, personal finance website Grow created a calculator to do the math for you.
If you are eligible for the new credit, you could start getting payments soon. The IRS could start providing advances on the 2021 credit through periodic payments of $250 for school-aged children starting in July 2021, depending on what the Treasury Department determines is workable.
Under the proposed schedule, which could be as frequent as monthly, families could receive half of their total 2021 child tax credit this year and claim the remaining amount on their 2021 tax returns.
The American Rescue Plan only guarantees the increase for the 2021 tax year.
Additional information for taxpayers on how they can access the Child Tax Credit is available at IRS.gov/childtaxcredit2021.
Understanding the "American Rescue Plan"
If you have questions about how this situation affects you, your family, or your business you can always Contact Us or Schedule an Appointment to break things down on an individual level.
As always we hope everyone is staying safe and healthy,
