New Stimulus Bill Includes Expanded Child Tax Credit, but You'll Need to Do This to Get It
Want your boosted Child Tax Credit? Make sure you file your taxes.
President Joe Biden's $1.9 trillion American Rescue Plan has already helped millions of Americans by putting stimulus funds into their bank accounts. And soon enough, more relief will be on the way. That's because the recently-signed aid package includes an expanded Child Tax Credit. But if you want to capitalize on that boosted credit, you'll need to do one important thing.
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Prepare to file a tax return
Normally, the Child Tax Credit is worth up to $2,000 per child under the age of 17 who's claimed as a dependent on a tax return. Thanks to the American Rescue Plan, the credit is increasing to $3,600 for children under the age of 6 and $3,000 for children aged 6 to 16. Parents of children aged 17 and 18 will be eligible for a $500 credit, as will those with full-time college students aged 19 to 24 who are claimed as dependents.
Half of the newly-expanded Child Tax Credit will be paid to eligible recipients on a monthly basis beginning in July, while the other half can be claimed as an actual credit on 2021 taxes. But either way, to get that credit, parents need to file a tax return. The IRS won't just give out that money automatically.
In fact, eligibility for the Child Tax Credit will hinge on the income levels reported on 2020 taxes, so if you're hoping to snag that credit, you'll need to file a tax return this year, which you can do until the May 17 deadline. Normally, lower earners aren't required to file a tax return, but if you don't submit one, the IRS won't know that you're entitled to the Child Tax Credit, and you'll miss out on getting your money.
The income limits associated with the Child Tax Credit are very high -- $200,000 for single tax filers and $400,000 for married couples filing jointly. This means that most households with dependents will be eligible for the newly-expanded credit.
If you've never filed a tax return before, the good news is that today's software programs make it easy to follow directions and get the job done. And if your income is $72,000 or less, you'll be eligible to file your taxes for free.
In addition to the Child Tax Credit, there may be other tax credits you're eligible for that can put money back in your pocket if you file a tax return. The Earned Income Tax Credit for example, is worth up to $6,660 for the 2020 tax year. So if you file a return, the IRS might pay you that sum in addition to the money you're entitled to for the new Child Tax Credit.
Even if you're normally exempt from filing a tax return, sending one in could work to your benefit -- especially this year, now that there's a newly-expanded Child Tax Credit in play. You still have a decent window of time to get your return done before the May 17 deadline. So make sure to submit your taxes and get the payout you deserve.
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