By: Laurie A. McCarthy, Esquire
The American Rescue Plan Act (“ARPA”) was passed in March, 2021 to provide relief for Americans amid the coronavirus pandemic. ARPA expands the Child Tax Credit (“CTC”) for tax year 2021 only.
The expanded credit means:
- The credit amounts will increase for many taxpayers.
- The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
- The credit will include children who turn age 17 in 2021.
- Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.
ARPA increases the maximum child tax credit in 2021 from $2,000 to $3,600 for children under age 6, and to $3,000 for children age 6 and up. It also makes the credit fully refundable and turns half of the credit into advanced payments.
About 39 million households are expected to start receiving automatic payments this July. Payments will continue to be sent out each month, around the 15th of the month, until the end of 2021. Eligible families will receive payments of up to $300 a month for every child under the age of 6 and up to $250 per month for every child ages 6 to 17. The total cost of the expanded CTC is more than $100 billion dollars for just one year.
Under the ARPA, individuals making up to $75,000, single parent head of household filers making up to $112,500, and married couples who file jointly with a combined income up to $150,000 per year are all eligible to receive the full amount.
One issue raised by organizations that work with low-income families is that some of the most vulnerable families who are eligible for the credits are not in the IRS system because they earn too little money to be required to pay taxes. Outreach programs will be necessary to ensure these families are aware of their eligibility.
Taxpayers who do not want to receive advance payment of the 2021 CTC will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon.
The Law Firm of DiOrio & Sereni, LLP is a full-service law firm in Media, Delaware County, Pennsylvania. We strive to help people, businesses and institutions throughout Southeastern Pennsylvania solve legal problems – and even prevent legal problems before they occur. To learn more about the full range of our specific practice areas, please visit www.dioriosereni.com or contact Laurie A. McCarthy, Esquire at 610-565-5700 or at [email protected]
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