The Internal Revenue Service has issued updated instructions for claiming stimulus funds from last year. Funds from the enhanced Child Tax Credit, specifically.
As part of the Biden administration’s American Rescue Plan, the child tax credit was increased from $2,000 to $3,600 per kid for those aged 5 and under, and $3,000 for those aged 6 to 17. Half of the credit – $1,800 or $1,500 – was paid in $300 or $250 monthly installments per kid from July to December 2021. The remaining can be claimed in 2022 when filing taxes for the year 2021.
“There are a lot of vital tax advantages for families, and we don’t want anyone to neglect the Child and Dependent Care Credit,” said IRS Commissioner Chuck Rettig. “We encourage families and others who may be eligible for this credit to check the criteria carefully to ensure that they receive the maximum amount available. We also encourage tax professionals and others to disseminate this vital information.”
Many parents received half of their extended child tax credit in monthly payments, but the remaining must be claimed upon filing, even if they don’t have to file a return because of their income.
The IRS has issued guidelines on who qualifies as a qualified child. The IRS states that the person can be claimed if:
- They haven’t reached the age of majority by January 1, 2022.
- They are the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, step-brother or sister, half-brother or sister, or any descendant of the taxpayer.
- In 2021, the child did not contribute more than half of their support.
- For more than half of 2021, the youngster lived with the taxpayer.
- The child is claimed as a dependent by the taxpayer.
- In 2021, the child either did not file a joint tax return with their spouse or did so just to seek a tax refund.
- The child was a citizen, national, or resident alien of the United States.
Credit for child and dependent care
Another reminder was for the Child and Dependent Care Credit, which was expanded for the tax year 2021.
Taxpayers may be eligible for a credit of up to 50% of their qualifying childcare expenses, depending on their income. The maximum allowable spending for this credit for the tax year 2021 is $8,000 for one qualifying individual and $16,000 for two or more.
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The credit is not available to taxpayers with an adjusted gross income of more than $438,000 per year.