While Parents Await the Return of the Increased Child Tax Credit, Another Windfall Is in Play

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The failure of politicians to extend the increased Child Tax Credit through 2022 has been a big setback for families, especially in light of rampant inflation and skyrocketing petrol prices.

Last year, the maximum value of the Child Tax Credit increased from $2,000 to $3,600 for children under the age of six, and from $3,000 to $3,000 for those aged six to seventeen. The credit was also made completely refundable, allowing families with no tax liability to collect the whole amount. Furthermore, half of the 2021 credit was distributed in monthly instalments that were deposited into bank accounts between July and December.

 

stimulus checks & Child Tax Credit (1)

 

Unfortunately, such monthly payments are no longer an option this year. Families with children, on the other hand, may still be in line for a sizable payout provided they claim the appropriate credit on their 2021 tax returns.

 

Another significant credit received a boost.

The Child Tax Credit received a lot of attention last year due to a significant upgrade. The Child and Dependent Care Credit, on the other hand, is a lesser-known credit that has increased significantly for the 2021 tax year.

The Child and Dependent Care Credit allows parents who pay for childcare so that their children can work to deduct a portion of their expenses. Prior to 2021, parents may claim up to $3,000 in childcare expenditures for one kid, or up to $6,000 in childcare costs for two or more children.

In 2021, parents could claim up to $8,000 in childcare expenditures for one child, or up to $16,000 in childcare costs for two or more children. The amount that families can claim now is determined by their income and will reach a maximum of 50% in 2021. (in previous tax years, it maxed out at 35 percent ). However, some parents who paid for daycare last year may be eligible for a $8,000 tax credit under the Child and Dependent Care Credit.

What’s more, the Child and Dependent Care Credit, like the Child Tax Credit, has been made completely refundable for 2021. As a result, even if a family has no tax due, they can still get up to $8,000 in full.

 

Don’t give that money up.

Many families are devastated by the elimination of the Child Tax Credit and the monthly payments it provided to low-income families. Those who paid for daycare last year, on the other hand, should make sure to claim the Child and Dependent Care Credit.

A 2021 tax return is required to do so. Some lower-income individuals are not required to file a tax return, but doing so is the only way to receive what might be a $8,000 payday.

 

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Those in need of assistance with their taxes can take advantage of free services such as VITA. However, it is advantageous to act promptly. The April 18 tax-filing deadline is less than three weeks away, and individuals who donate their time to assist others with tax preparation may find themselves more busy.

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