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New changes to the child tax credit may provide families with monthly payments worth up to $250 per child (and $300 per child under 6) as soon as the summer. With taxes due May 17, you may wonder if this affects your 2020 tax return.
Thankfully, the recent updates to the child tax credit won’t require you to make any changes to your 2020 tax return. Eligibility is simply based on your 2019 or 2020 tax return information, depending on when you filed.
However, extra money may be coming your way soon since changes in the American Rescue Plan Act include an advance on your 2021 child tax credit as soon as July. The $1.9 trillion plan, which passed the Senate on Saturday and the House on Wednesday was signed by President Biden on March 11.
Below, we break down the temporary child tax credit changes and how to determine if you’re eligible.
Traditionally, the child tax credit provides parents who earn at least $2,500 with a $2,000 credit for each child under 17. If your child tax credit exceeds the amount taxes owed, you can receive up to $1,400 as a refund.
The child tax credit is based on your adjusted gross income (AGI). Benefits begin to phase out at $200,000 for single people or heads of household and $400,000 for married couples filing jointly.
The new child tax credit will temporarily increase the amount of money parents get by up to $1,600 more per child: $3,000 per child under 17 and $3,600 per child under 6.
Parents will also be able to get an advance on half of their 2021 credit, with monthly payments of $250 or $300 per child starting in July and running through December. The remaining child credit will be given after filing 2021 taxes next year.
Additionally, the temporary changes will waive the $2,500 earning requirement, so parents who aren’t employed can benefit. The changes will also lower AGI caps to $75,000 for single filers, $112,500 for heads of household and $150,000 for married couples filing jointly. Qualification status will be based on either your 2019 or 2020 tax return information, depending on if you filed your 2020 taxes at the time payments are disbursed.
Parents who aren’t eligible for the higher credit will still be able to claim the traditional child tax credit of up to $2,000 per child, granted they meet the eligibility requirements.
If you haven't filed your 2020 tax returns yet, time is ticking. Taxes are due May 17, 2021, so consider filing your taxes with one of the best online tax filing programs.
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