During the COVID-19 pandemic, the federal government disbursed $814 billion in financial relief through 476 million direct payments, with the final round of stimulus relief issued in March 2021. Although subsequent stimulus checks have not been forthcoming, an important financial opportunity persists for eligible individuals in the form of a valuable tax credit.
The American Rescue Plan Act, implemented during the pandemic, expanded the Child Tax Credit, offering eligible parents $3,000 per child aged over 6 and $3,600 for those under 6. This expanded credit, however, ceased in 2021. While the direct monthly deposits into bank accounts also concluded, the original Child Tax Credit, predating the pandemic, is still claimable, albeit with a reduced amount. To access this credit, individuals need to submit a tax return and await processing by the IRS before receiving payment.
The current Child Tax Credit provides up to $2,000 per qualifying dependent child, a reduction from the higher amounts during COVID-19. Despite the decrease, this tax credit remains valuable, as credits result in a dollar-for-dollar reduction in owed taxes, offering substantial savings. While deductions merely reduce taxable income, credits directly lower the tax liability.
Individuals must meet specific criteria to claim the Child Tax Credit, including the child being under 17 at the tax year’s end, qualifying as a dependent, and having a specific relationship with the claimant. Additionally, the child must have lived with the claimant for at least half the year, and the claimant must have provided at least half of the child’s support. The child needs a Social Security number and must be a U.S. citizen, national, or resident alien. Eligibility diminishes for individuals with a modified adjusted gross income exceeding certain thresholds ($400,000 for married joint filers and $200,000 for others).
For those not owing the full $2,000 in taxes, part of the credit (up to $1,600) may be partly refundable, potentially resulting in a refund exceeding the amount paid to the IRS. However, to claim the full $2,000, individuals must owe at least that much in taxes.
To determine eligibility, the IRS offers an interactive tool, assisting individuals in verifying their qualification for the tax credit. Prospective claimants should utilize this tool before the official tax-filing season to ensure they can seize this valuable credit. If eligible, submitting tax forms promptly is crucial to accessing the deserved funds.
