The American Rescue Plan provided economic relief benefits to Americans due to the ongoing coronavirus pandemic. One of the major benefits was the child tax credit provided to parents with eligible co-dependents.
The child tax credit was provided monthly between July 15 and Dec. 15.
Parents with co-dependents under the age of 6 were eligible for $3,600 or $300 monthly payments. Those with co-dependents between the ages of 6-17 were to receive $3,000 or $250 monthly payments.
These monthly payments added up to be half of $3,600 or $3,000 per eligible co-dependent, respectively. Hence, families have to claim the rest when they file their 2021 taxes. Though depending on their tax situation, some parents may get a lower refund or even owe money.
If the child tax credit was based on your 2020 income and later got a job in 2021 making more money than the eligibility requirements then you end up owing money when you file your taxes or get a lowered return.
Neil Becourtney is a tax partner and certified public accountant in Holmdel, N.J., and he told NJ.com this scenario may happen because the credit was based on 2020 taxes, not 2021 taxes.
“For some taxpayers, income may have plummeted in 2020 due to the pandemic with widespread unemployment throughout the country and many businesses closed or with curtailed operations for extensive periods,” Becourtney told NJ.com.
“The reduced income may have generated the advance tax credit payments, which may end up being reversed when the 2021 Form 1040 is filed, reporting higher income, resulting in a partial or full phaseout of the credits,” he added.
Single taxpayers were eligible if they make $75,000 or less and married couples who make $150,000 or less combined were eligible. $50 of the credit would be deducted with each additional $1,000 parents make above the eligibility amount.
For parents making more than the eligibility requirements still qualify for $2,000 per kid, a previous amount made available. For single taxpayers, they’ll have to make $200,000 or below, and for married couples $4000,000 or below to qualify for the $2,000.
Read more via NJ.com.
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Tags: Benefits
