Since 1997, the federal child tax credit continues to assist millions of families with providing for their children. Originally developed as a way to provide economic relief, it enables the taxpayer to receive a maximum tax credit of $2,000 for each qualifying child.
On average, the credit allows households to claim between $2,000 and $2,900 in credit. Close to 50 million taxpayers took advantage of said credit — many of whom claimed more for more children. This credit is changing however.
Below is a rundown of what you need to understand about the conditions pertaining to the Child Tax Credit.
Child Tax Credit Expansion Plans
The child tax credit is changing. These changes will fall under the stimulus package for a bigger Covid-19 relief effort. When approved, it will increase the eligibility amount to $3,000 – $3,600 depending on their ages. The Biden relief plan would also permit an entire year to be refundable for the credit, which is currently not fully refundable.
The main reason for increasing the credit is to help low income families. In fact, more than 25 million families qualify as low income. Since many low income families only qualified for a partial credit, the increase would be the additional amount needed.
IRS Letters Discussing CTC Details
For families who received advanced payments of the child credit or their third stimulus relief check need to be aware of a couple of letters coming from the IRS. Taxpayers can expect them prior to the end of January 2022.
The IRS letter (known as letter 6475) will include the receipt of the third stimulus relief check. This letter will assist in determining their receipt of the payment or whether they would benefit more from the rebate credit as they prepare their taxes for 2021.
The second letter (known as letter 6419) is a statement of the monthly advanced credit amount. This will detail how much credit was issued and how many children were calculated into the equation. This should help everyone understand their 2021 taxes.
Up to December 2021, eligible taxpayers should’ve obtain $300 monthly if their child was under 6 years old. For children aged 6 to 17 years old, they receive a maximum of $250 each month. These amounts were considered the advancements for the full credit amount. For example, if all monthly payments were received on top of the original $1,800, then they will get an additional $1,800 through their tax returns. However, if the credit is not taken, the entire amount ($3,600) will be applied on their tax return.