COLUMBUS, Ohio (WCMH) — The American Rescue Plan Act of 2021 has upped the child tax credit substantially — as high as $3,600 per child, ages five and under, for qualifying people.
You don’t need an income to get the credit, although you do need to file a tax return with your name, social security number, and other vital details.
Child Tax Credit Payment Calculator
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How the child tax credit has changed
Mark Steber, Chief Tax Information Officer, Jackson Hewitt Tax Service, talked with NBC4 about the changes in the law, who benefits, and how much they stand to receive.
“The Child Tax Credit has been around for decades and it’s a very popular tax credit for all types of payers, many tens of millions take advantage of it every year, and historically it’s been about $2,000 per child,” said Steber.
“It’s a much bigger credit for potential taxpayers in tax year 2021, it’s as high as $3,600 per child ages five and under. And they raise the age on who qualifies: for ages 6 – 17 is now $3,000 again, up from $2,000.
“And they even left in the architecture for the old credit, the $2,000. If you don’t qualify for the $3,600 or the $3,000, if your age or your income doesn’t allow you to qualify, you can still qualify for the $2,000 credit.”
Who qualifies for the expanded child tax credit?
Eligibility is determined based on Adjusted Gross Income (AGI), the amount of income reported after deductions are made.
- Single filer — Phase-out begins at an AGI of above $75,000
- Head of household — Phase-out begins at an AGI of $112,500
- Couple filing jointly — Phase-out begins at an AGI of above $150,000
- Child age 5 and younger — Max credit of $3,600 each
- Child age 6-17 — Max credit of $3,000 each
- Phase-out — The maximum value of the tax credit reduces by $50 for every $1,000 in income above the AGI limit.
Steber says the first pitfall for taxpayers is confusion. It’s difficult to sort out which credit you get, the dependency classification, custody, and income level. Added to that is a new ability to give some taxpayers a portion of their credit — up to half, monthly, beginning in July — which they will reconcile on their next tax return.
“But in its simplest level, larger tax credit, millions of more people will qualify for a larger amount. They’ve also made it totally refundable, which is a dramatically big shift change from the old credit where you could offset your liability and then get up to about $1,400,” Steber explained.
But what if your income is low or zero? You should still file a tax return, and the IRS will cut a check or put the money into your account. This is a big change, and very different from years past. As Steber explains:
“If they have qualifying dependents aged five and under, they will put simply [that information] on their tax return after they fill out some of the questions, and the required information: name, Social Security number, typically relationship, and number of months in the home… You’ll qualify for up to $3,600 dollars in refundable tax credit on your tax return [per qualifying child].
“If you had zero income, low income, divorced, unemployed, laid off, injured, unable to work — you will get $3,600 per qualifying dependent… Now, as the law was written, if it was on the tax return in 2020, the current year tax return, and it looks like you probably will have the dependent next year, the IRS is going to advance half of those moneys to the taxpayers in the same venue that they got their refund this year, direct deposit or by check or through some account or some other means to get their tax refund.
“That’s how they’ll get the advance payment. But ignoring all of the advance payment part: $3,600 for five and under; $3,000 of tax credit, ages six to 17. And then if you age out, and you still qualify because of your income, you can get up to $2,000 in tax credits.”
You don’t need a bank account for the IRS to put the money into. The IRS will send you a paper refund check, mailed to your house, if you’ve filed an income tax return with the correct information, says Steber.
And finally — there is no limit on the number of children. There is a limit on the amount of income that you can earn, $150,000, before you begin losing portions of the credit which phases out for higher income earners, Steber concluded.