Child Tax Credit: What’s the Deal?
Hey Taylor: Child tax credit... what’s the deal with it? Do I need to do anything, how much is it, how does it all work? — Christina
Hey Christina: Great questions! People talked about this a lot when the original stimulus bill was signed, and now the child tax credit rollout is beginning so it’s time to refresh on what exactly is happening.
1. Income-dependent credit. Just like the multiple stimulus checks Americans have received, eligibility will depend on how much you make. Individuals making less than $75,000 and couples making less than $150,000 a year can expect to see $300/month per child under six and $250/month for each kid between 6-17. Households with higher earnings will still get the previous $2,000 tax credit, but won’t see the monthly payment totaling the higher amount.
2. Effect on taxes. If you hear someone saying you’ll have to pay the money back, that’s a misrepresentation. Previously, parents would get a tax credit for their dependents. In this year’s stimulus-based model, the credit goes up and comes by way of monthly checks/direct deposits. That means the money you might be used to seeing on your tax return will have already hit your bank account. It could also get a little sticky for people who jumped into a new income bracket between 2020 and 2021. Nothing’s ever neat or easy when it comes to taxes, and these payments could present a minor nuisance when you file in 2022. Still, the money is part of the stimulus payment and shouldn’t be viewed as any sort of loan. It’s yours.
3. Your obligation. If you filed your taxes, you probably already have money in your bank account. If you didn’t, you can go to the IRS.gov site to apply and get the money you’re owed. If you don’t like the tax part I mentioned above, you can join the 1 million-plus people who have already opted out of the monthly payment and just want to get this money as a credit when they file taxes. That step can also be taken through the IRS website.
Hope this answers your questions. If you’ve already received your payment, I hope you and your kids are able to put it to good use!