If you have a child and earn less than $75,000 annually, or $150,000 for a married couple filing jointly, you may be interested in the recent expansion of the child tax credit signed into law by President Joe Biden in March.
When a family has a child between the ages of six and 17, they’ll be eligible to receive $3,000 annually. If their child is under the age of six, they can receive up to $3,600 annually if they meet the income parameters.
But will anyone that falls within the income restrictions receive the advanced Child Tax Credit?
Can households earning above the threshold receive the tax credit?
Does the tax credit need to be paid back?
AA Tax & Accounting Services, LLC has the answers to all your questions and more.
What is the advanced child tax credit?
Taxpayers with children under 18 are eligible to receive a tax credit if they earn less than $75,000 annually or $150,000 for a married couple filing jointly. Households that earn above this threshold are still eligible to receive a portion of the tax credit, ceasing for individual taxpayers earning $95,000 and married couples earning $170,000 filing jointly.
If receiving the advanced Child Tax Credit, you don’t have to wait until you fire your 2021 taxes to receive it. The advance payment will be distributed to qualifying households every month starting in July through December 2021 on the 15th of each month. The remainder of the tax credit will be claimed by the taxpayer when they file their 2021 taxes in 2022.
Eligible taxpayers will receive the credit for any qualifying children — there is no cap on the number of children in a family that can receive the credit.
How to qualify for the child tax credit
As a parent, you may be wondering how to qualify for advanced Child Tax Credit payments. To receive the tax credit, you and your spouse, if filing jointly, must:
- File a 2019 or 2020 tax return and claim the Child Tax Credit on the tax return
- Fall within the income limits of $75,000 for individual filers and $150,000 for joint filers
- Have a primary residence in the United States where you reside for more than half the year
- Have a qualifying child with a social security number under the age of 18 years old at the end of 2021
If you and your spouse meet these requirements, you can qualify to receive the advanced Child Tax Credit.
Should I opt-in to receive the child tax credit?
Unlike stimulus payments, taxpayers will be required to pay back the Child Tax Credit if their circumstances change that knock them out of the qualifying. For instance, if your child will be aging out of the age bracket or you or your spouse will have a substantial change in income, you may opt out of the advance payments.
Tax consulting services in Cedar City, Utah
If you have children, you may be wondering if the advanced Child Tax Credit is something you should opt into.
We recommend consulting certified public accountants like AA Tax & Accounting Services to better understand all the tax deductions available to you. We have the experience to guide individuals on the best strategies for maximizing their deductions and tax credits with our tax consulting services.
The AA Tax & Accounting Services team can help you execute the right tax strategies as a parent of a child under the age of 18 years old. Contact us to schedule an appointment.