Millions of households with children receive vital financial assistance through child tax credits each year. The American Rescue Plan, however, temporarily increased the child tax credit the year before, raising several issues going forward.
How Do State Child Tax Credits Work ?
Child tax credits were first introduced in 1997 to provide financial assistance to middle-class and low-income families with children. To aid families during the epidemic, the credit—which was previously worth $2,000 per qualified dependent—was raised to a maximum value of $3,600 for the 2021 tax year.
Additionally, from July to December, parents who reclaimed the refund on their 2020 taxes got early payments of up to $300 per kid.
Families who qualify and chose not to get monthly payments will be able to claim the credit in one single figure on the 2021 tax returns. Tax filing without penalty was due by April 18th. However, if you had requested an extension, you would have received an additional six months. For families that got payments, the remaining child tax credit will be added to their return or can be applied to unpaid taxes.
Can Either Parent Receive Credit ?
In general, only one parent may deduct a dependant from their taxes. As they split the benefits, married couples who file a joint tax return technically have both “claimed” the credit. If a married pair files individually, one parent can share the benefit and get 50 percent of the child’s tax credits. The parent who will claim the kid as a dependent every year must be decided by divorced, legally separated, or unmarried couples.
The credit may not be available to both parents, though. If your co-parent intends to claim the entire benefit on the tax return and you listed your kid as a reliant in 2020 & got payouts in 2021, you might be compelled to refund those funds.
How to Assert ?
The IRS has a helpful tool to determine your eligibility if you have never claimed the child tax credit. The amount received by individuals and couples who claimed a dependant for 2020 and got advance payments must be compared to the total credit amount for which they are qualified. As a result, you will have to pay back a portion of the funds or claim the remaining credit.
You will be required to return the credit unless you are eligible for repayment protection if you claimed a reliant in 2020 but the kid’s other parent is attempting to claim them for 2021. Additionally, even though the other parent got advance payments, you can still claim the entire tax credit you are on the tax return if the second parent collected the benefit in 2020 but you typically alternate years. And fortunately for those who didn’t file, a mechanism that will let families up the claim to $3,600 has recently reopened reports Sun.
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