At the peak of the COVID-19 pandemic, the United States government rolled out a massive relief effort, issuing 476 million direct payments to its citizens, totaling an impressive $814 billion. The last of these financial aids were distributed in March 2021, and since then, there haven’t been any more. Similarly, the American Rescue Plan Act enhanced the Child Tax Credit, offering eligible families $3,000 for every child above 6 years, and $3,600 for younger children.
However, this augmented benefit came to a close in 2021. While the prospect of future stimulus payments currently seems unlikely, it’s important to remember that other forms of government support are still in place. One key example is the Child Tax Credit, which continues to be available for those who meet certain conditions.
Beyond Stimulus Checks understanding the ongoing child tax credit benefits
The wrap-up of pandemic-specific financial assistance doesn’t mark the end of all support programs. A significant component of the governmental response to the pandemic was the enhancement of the Child Tax Credit. This adjustment not only increased the amount of the credit but also introduced a system of direct monthly payments to eligible recipients, ranging between $250 and $300.
Even though these direct payments have stopped, the Child Tax Credit itself is still operational. Taxpayers are eligible to claim the original version of this credit. While it may not be as large as the amount offered during the pandemic, it continues to provide valuable financial relief. To benefit from it, taxpayers need to file a return and await the IRS’s processing.
For individuals who relied on these automatic deposits or those who were previously unaware of the credit, it’s crucial to understand that this support is still accessible, though it now requires a bit more effort.
Presently, the Child Tax Credit offers a maximum of $2,000 per qualifying child, which is less than the pandemic-era amounts of $3,000 or $3,600. Nevertheless, this amount remains significant, especially when considering the impact of tax credits compared to deductions. A tax credit directly decreases the amount of tax owed, dollar for dollar.
To illustrate, a $2,000 tax deduction reduces taxable income, potentially saving about $440 in a 22% tax bracket. Conversely, a $2,000 tax credit would directly cut down your tax bill. If you owe $5,000 in taxes and apply a $2,000 credit, your new tax liability would be $3,000.
This substantial benefit underscores the importance of accurately claiming the credit, particularly in a time when government support for families is not as extensive as it was during the pandemic.
To be eligible for the Child Tax Credit, various requirements must be met, such as:
- Age and Relationship: The child must be under 17 at the end of the tax year and should be your dependent, which includes your child, stepchild, foster child, sibling, or a related descendant.
- Residency and Financial Support: The child needs to have lived with you for more than half of the year, and you should have provided most of their financial support.
- Citizenship and Identification: The child requires a Social Security number and must be a U.S. citizen, national, or resident.
- Income Restrictions: The credit reduces or becomes unavailable at higher income levels – $400,000 for married couples filing jointly and $200,000 for all other filers.
Interestingly, a portion of this credit, up to $1,600, could be refundable. This means you might receive a refund greater than the taxes you paid. However, to claim the entire $2,000 credit, your tax bill must be at least that much. The IRS has an interactive tool to assist in determining eligibility for this tax credit. It’s recommended to use this tool before the tax season starts to see if you qualify. If you do, make sure to file your taxes promptly to take advantage of this beneficial credit.