After the severe economic blow that families experienced during the Covid-19 pandemic, the United States government decided to give financial support to families with children. As of mid-July, millions of American family members have received contributions of up to $1,800. So far the “child tax credit 2021” has been a success, so President Joe Biden has already extended this tax credit at least until 2025 through the family plan with a budget amount of 1.8 billion dollars.
The credit works like this: it is available to all families who have children under the age of six and children from six to 17 years of age.
However, one of the first filters to receive it is that they must be permanent residents or citizens of the United States.
The system implies that all families receive only half of the total economic benefit since the other 50% will arrive once the taxpayer files their annual tax return in 2021.
And it’s also important to clarify that within all families applying for federal support, those living in poverty levels and rural areas have priority in the allocation to the program.
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If you have a child under six years of age, you will be entitled to receive $300 per month. Also, if the children are over six years of age, but are under 17 years of age, the government will award a monthly amount of $250.
“Raising children is expensive. We know that many families face challenges in meeting the costs of rent, utilities, child care, and food every month, and the flexibility provided by a child benefit like this can allow them to use the money in the way that they consider most important, ” said H. Luke Shaefer, Director of Poverty Solutions
The Internal Revenue Service will calculate the corresponding money according to the returns filed in both 2019 and 2020.
So the beneficiaries don’t need to take another additional action, since the IRS sent letters in bulk to households that could qualify for this economic benefit.
But if you want to apply on your own, it’s also very important to include the appropriate documents in case you are going to make an application. Your documents show if the program fits you.
If you want to receive the refund through direct deposit, you will need bank information (voided check and/or deposit slip in savings accounts). You must present a copy of the previous year’s tax return if you have it.
For each person applying, any of these documents:
- Driver’s license / official photo ID
- Dependent Social Security Card
- Social Security Card or ITIN
In case your family or economic situation changes, you should not worry, you can update the information about changes in your income, marital status for tax return purposes, or the number of qualifying children (for example, if you had or adopted a child later filing the tax year 2020 forms).
Families who don’t want to receive the advance payment of the 2021 Child Tax Credit will also have the opportunity to decline to receive advance payments.
According to experts from the Center on Budget and Policy Priorities, the credit will be less for married couples who earn an income of no more than $150,000, such as heads of household with an income of up to $112,500 and for those who are single or married for separately that they declare up to 75 thousand dollars.
For households that exceed these amounts, the credit will have a reduction of $50 for every $ 1000 over of the MAGI (modified adjusted gross income).
In the same way, families that definitely exceed the MAGI to request the $3,000 or $ 3,6000 credit still have the possibility of collecting the support that corresponds to children under 17 years of age of $2,000, because this benefit is also available to citizens with income of $200 thousand or $400 thousand if they live married and the amount is earned by both.
But besides being an extra monthly income, what other benefits make this child’s credit a good idea?
- The payments are fully refundable, which means that you can benefit from the credit even if you have no earned income or do not owe income taxes.
- It’s better to collect a large sum of money next year than many small payments in 2021.
Because once you have the money in small amounts, you become more prone to spending it on unnecessary things without realizing it. But if you and your family are looking to save for a greater expense, such as paying some debt or having a larger refund at tax time, this credit can work.
- You can receive half of your CTC credit before filing your tax year 2021 return and claim the remaining half when you file your tax year 2021 returns.
- If you are aware that the economic situation in your home or the tax situation may change without prior notice this year and you don’t want to have the obligation to update your information on the IRS website. This could happen, for example, to divorced parents who alternate custody of their child.
- You can include your son, stepchild, adopted child, foster child, grandchild, or great-grandchild in the claim.
- If you have siblings, stepbrothers, or half-siblings who live with you, you can include them as well.
- If you’re concerned that the IRS might send you an overpayment based on previous 2020 or 2019 tax information, but you don’t really plan to pay back some of that money next year. Cases of this type could be seen in households that have increased their monthly income, for example.
If you are looking for more information regarding loan opportunities, here in Safe Loan we are always pleased to help you know and improve your finances.