Money In Parents' Pockets: American Rescue Plan Includes Child Tax Credit Expansion
PITTSBURGH (KDKA) - With a nod to "Jerry McGuire" lots of parents are saying "show me the money."
The American Rescue Plan includes a one-time boost to the Child Tax Credit and it will mean money in parents' pockets soon.
"It's a one-year change effective for the 2021 year, but it's based on your filing from your 2020 return," says CPA Heather Pleskonko a Senior Manager with Baker Tilly.
The permanent child tax credit of $2,000 per child does not change, but Congress has added a bonus on the credit.
"The credit goes up to 3,600 for 2021 if you have a child under six, and is $3,000 for children six through 17," says Pleskonko.
Only this time the IRS isn't making you wait until you file your taxes next year to get the money.
"They're trying to do it in what they call periodic payments, which we expect to be a monthly payment to taxpayers starting the middle of 2021, June, July timeframe," Pleskonko said.
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Those payments are expected to be monthly.
"If you are eligible because you have a child that's under six, you would get $300 per month, and the children six to 17 parents would get $250 per month per child," Pleskonko explained.
But only up to half of your total deduction for the year.
"The remainder would be taken as a credit on your 2021 return," she said.
Pleskonko says you will want to make sure you file your 2020 taxes soon because the IRS will base the Child Credit on your last return. So if you have a child who's aged out of eligibility and that you won't be able to claim as a deduction if the IRS sends you money for that child.
"You'll be required to repay that when you file your 2021 return," she said.
And if you have had a baby this year, or soon will...
"They're addressing this they are going to have a portal available through the IRS website where you can report life events," Pleskonko said.
Pleskonko says making adjustments to your personal profile is on you and that, "the IRS won't do that for you."
Depending on your income Pleskonko says you may not get the full tax credit.
"If you are a married filing joint household and you make over $150,000 this credit starts to phase out," she said.
If you are single the phase-out starts at $75-thousand dollars, and if you file as head of household the phase-out starts at $112,500.
Again, the amount the payout from the IRS will total one half of your deduction for the year, and the rest will be claimed when you file your 2021 taxes.