Some of the biggest changes to your 2020 tax implications are around the Child Tax Credit, so to understand how they impact you & your family, here’s what you need to know:
For those with kids, instead of receiving this credit as part of your tax return as in years past, you’ll now be receiving monthly payments from the IRS for each child, depending on their age.
The fully refundable credit, with 50% of the credit issued as advance periodic payments starting in July 2021, will be reconciled on your 2021 tax return and the IRS will issue these advance payments of the child tax credit based on your 2019 or 2020 tax return information.
These changes also include an increase of the child credit from $2,000 to $3,000 per eligible child under age 18 and $3,600 per child under age 6. This means that if your child turns 6 in 2021, you’ll still receive the $3,600 (dispersed in monthly payments) for this year.
What if I don’t want to receive the advanced credits?
The IRS has been tasked with creating an online portal to allow taxpayers to opt out of receiving these advanced payments for their child tax credit and also to be able to provide information regarding changes in income, marital status and the number of qualifying children (to determine each taxpayer’s maximum eligible credit).
While the team here at ITP Taxes would love to give you a timeline on when this will happen, we simply don’t know. If you’re not on our mailing list, this would be a great time to email us and sign up as you’ll be the first to know when this portal is created.
How do I know if I’m eligible for the increased Child Tax Credit?
For 2021, the increased credit amount of an additional $1,000 – 1,600 per child depending on how old they are begins to phase out at:
- $75,000 for those filing as Single
- $150,000 for those who are Married Filing Jointly (or surviving spouse)
- $112,500 for head of household