Wouldn’t it be nice to get some credit for being a parent? Well, you can, and this year you can get even more from the child tax credit.
The March relief bill added an additional tax credit to the $2,000 per child that was already in place. For 2021, you can receive up to $1,600 for each child under six and $1000 for children under 18. Dependents are only eligible for up to $500. This additional money comes after an intense year of struggle for many families and is a much-needed reprieve as the pandemic continues.
This additional credit gradually disappears starting at a lower income base than the original child tax credit: $150,000 for some joint filers, $112,000 for some head-of-household filers, and $75,000 for some single filers. For each additional $1,000 above the threshold, the taxpayer loses $50.
The original child tax credit and the additional one apply to children under 18 this year instead of 17. Families in the low-to-moderate income range can receive both the regular child tax credit and the extra one even if they don’t owe any tax.
Beginning July 1, some families may receive an advance payment on those child tax credits, but there are no details available.
The suspended personal exemption may be less valuable to some middle-income filers than the regular child tax credit. In 2017 before the personal exemption was suspended, filers typically received $4,050 for each household member. A credit gives a filer “dollar-for-dollar” balance on taxes, but the personal exemption was an income deduction that gradually fell away for higher-income earners.
Alternatively, those with older dependents find the child tax credit less appealing than the personal exemption because it’s not worth as much. The personal exemption should come back in 2026 when the child tax credit expires in 2025.
Check the IRS website to see more information and follow me for any updates.
