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This month, many parents received their first monthly installment of the Advance Child Tax Credit Payments. Qualifying parents will receive a monthly payment starting in July through December 2021. How this works: parents get a Child Tax Credit for the 2021 tax year, and the monthly payment is an advancement of that credit. The total of the advanced payments received July – December is half of the total Child Tax Credit. The other half is claimed when you file your 2021 income tax return. Click here to be directed to the IRS website to see if you qualify.
The Child Tax Credit increased in the 2021 tax year to:
One criterion for receiving the Child Tax Credit is having filed taxes for 2019 or 2020. This means the parent who claimed the child or children in the most recent filed taxes will receive the Child Tax Credit in his or her account. For some divorced or never married parents, this could cause some issues. For example, if there is one child involved and claiming the child on taxes is an every-other-year event per a decree. Most divorce or paternity decrees did not contemplate stimulus money, especially stimulus money as it relates to children. Some parents can work it out on their own, but some may want to talk to an attorney to help navigate this issue.
Another possible issue related to the Child Tax Credit is the amount a person qualifies for could change at tax time. Since the credit is based on income from either 2019 or 2020, a person may make more money in 2021 and the tax credit may be reduced.
The credit is reduced to $2,000 if your modified annual gross income exceeds:
The reduction to the Child Tax Credit is $50 for every $1,000 your income exceeds the income above.
The Child Tax Credit Advance assists millions of parents and is welcomed extra money in pocketbooks! However, there are some things parents need to be aware of so come tax season, there are no surprises.
Click below to see the IRS’s frequently asked questions regarding this topic.
For assistance with the Child Tax Credit or other family law issues, please contact the family law attorneys at Berkshire & Burmeister.