If you are an American parent, you may have some money coming to you from the government. In new rules for this year only, Congress has changed the Child Tax Credit 2021 so that it provides financial relief for families that have suffered hardship as a result of the COVID-19 pandemic.
The new rules are expected to reduce child poverty in the US by half and reduce racial disparities by making funds available to more Black and Hispanic families. Learn everything you need to know about the Child Tax Credit below.
The Child Tax Credit is a deduction from income taxes due in a flat amount for each dependent child in a family and has been around for years. However, in March of 2021, Congress passed some changes in the Child Tax Credit as part of the American Rescue Plan.
The revised Child Tax Credit acts as an economic stimulus to help families that may have lost jobs or income because of the pandemic and the widespread business closings that were implemented to stop the spread of the disease.
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There are some significant changes to the Child Tax Credit 2021:
- Higher amount – The amount used to be a maximum of $2,000 per qualifying child. Now, the maximum is almost double at $3,600.
- Different amounts based on age – Previously, the amount of the Child Tax Credit was the same for all qualifying children. For 2021, however, there is a different amount based on the age of each child. Parents of children from birth through, but not including, six years old can get up to $3,600 per child in that age range, but receive a maximum of $3,000 for kids aged 6-17 years old.
- Expanded age range – For 2021, parents can claim the Child Tax Credit stimulus money for their 17-year-olds, whereas before the oldest qualifying age was 16.
- Refundable amount – If a taxpayer was due for a tax refund, they could only get a portion (up to $1,400) added to their refund amount for each child under the Child Tax Credit. For 2021, the full amount is refundable.
- No minimum income requirement – American parents who earned no income in 2021 can still claim the Child Tax Credit stimulus. Before, they had to earn at least $2,500 to claim the Child Tax Credit.
- Prepayment – Normally, taxpayers would get the entire benefit of the Child Tax Credit after their income tax return was filed and processed by the IRS. For this year, half of the amount will be paid in Child Tax Credit payments over a period of six months, with the other half offsetting taxes due when the return is filed.