Having children brings out many emotions for parents, but in2021, children brought their parents extra happiness in the form of tax credits. The American Rescue Act offers additional tax credits to those with children under the age of 18 still living at home.
Child Tax Credit
o Fully refundable in 2021
o Increases tax credit from $2,000 to $3,600 for children under age 6, and $3,000 for children over age 6 and under age 18.
o Every child age 17 and under, as opposed to 16and younger, is covered.
These additional amounts will bring great assistance to parents in need. The Internal Revenue Service plans to estimate what your tax credit will be and then pay this to you monthly from July 2021 to December 2021,rather than waiting until filing in 2022.
Child and Dependent Care Credit
o Fully refundable in 2021, but not in 2020
o For the 2020 tax year, the credit can get you20% to 35% of up to $3,000 of expenses for a child under 13, and up to $6,000of expenses for two or more dependents. (Amounts may vary based on income.)
o For the 2021 tax year, the credit can get you up50% of up to $8,000 of expenses for a child under 13, and up to $16,000 of expenses for two or more dependents. (Amounts may vary based on income.)
Previously, the income limitation began at $15,000, but for2021, the income limitation begins at $125,000. Many more parents will find this credit applicable in 2021.
Make plans to reach out to our accounting team if you have questions about these tax credits.
Child and Dependent Care Tax Credits: The Basics and what parents need to know.
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