What You Need to Know About the Child Tax Credit

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(Low-income people—under $40,000 a year for unmarried taxpayers and $60,000 for married couples—will generally not have to make advance payments if they are not eligible in 2021 due to a change in the number of children who qualify. report from the Congressional Research Service.)

Also, Joanna Ain, deputy director of policy at Prosperity Now, a nonprofit that promotes financial security for low-income people, said some families choose to get a big refund when they file their tax returns as a kind of forced savings plan.

“The tax refund is the only time they’ve seen this type of money,” he said. They may worry that they will spend the money if it is distributed in smaller quantities, rather than coming as a bulk amount that can help cover expensive items such as large appliances, heating systems or car repairs.

Divorced couples with joint custody of children may face a different problem. They usually get the child tax credit in alternate years: One spouse claims it one year, the other the next, and so on, Mr. DuFault said. But the IRS will likely send the advance payments to the spouse who claimed the loan in 2020 and may need to pay it back or get a smaller refund later at tax time next year.

In order to prevent this, the spouse who will not be able to get the loan can give up the prepayment. Jeffrey Wood, certified public accountant and partner at Lift Financial in Southern Jordan, Utah, said he may not receive the “correct” co-advance payment, but he may claim the full credit on his tax return next year.

For more details on the loan, the IRS has compiled a list. Frequently Asked Questions. White House It also has a website devoted to tax credits, with examples of credits families can expect based on their income and family size.

Here are some questions and answers about the 2021 child tax credit:

You can get full credit if your income is less than $75,000 for single applicants, $150,000 for married couple filing joint tax returns, and $112,500 for “head of household” applicants (usually unmarried single parents). Credit begins to rise above these thresholds and drops to zero on higher incomes ($240,000 for unmarried taxpayers and $440,000 for married couples, according to samples from the Congressional Research Service).

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