As a result of allowing the increased Child Tax Credit to expire at the end of 2021, it had a substantial impact on low- and moderate-income families across the country. Before the tax credit’s expiration, millions of families had received a considerable financial boost of $250 to $300 per month for each qualified child in their family. This was a significant financial boost for many families.
This payment, which arrived in bank accounts and emails between June and December 2021, made it significantly simpler for cash-strapped parents to make ends meet during that period.
At one point, there was the possibility of extending the temporarily boosted tax credit for an additional fiscal year. However, because lawmakers were unable to reach an agreement on the parameters of renewal, the temporary program was allowed to expire rather than be extended.
Because of the absence of the monthly Child Tax Credit checks, millions of families found themselves in precarious financial positions once again. Even though the payments were terminated only a few months ago, current data demonstrates just how much families are struggling without the tax credit money.
However, the bill is still in its early stages, and it is unclear whether or not it will be able to get through the legislative hoops that must be jumped through by MPs. Although not all families qualify for the Child Tax Credit, there is still money available for those who do.
This year, the amount available could total up to $8,000 for those who do qualify. Here’s what you need to know about this tax credit advantage, as well as who might be eligible for it.
You May Not Be Aware of the $8,000 Child Tax Credit Benefit That Is Available to You.
Several people have expressed concern regarding the process of claiming the other half of the Child Tax Credit money on your tax return, and it is understandable. However, another benefit that parents can take advantage of is an $8,000 maximum credit that can be claimed on your taxes for childcare and similar expenses. This is something that isn’t commonly discussed.
This benefit was included in President Joe Biden’s American Rescue Plan, which also includes the distribution of the Child Tax Credit to families every month. To qualify for this tax credit, you must have paid at least 50% of your daycare expenses in the previous year, up to a maximum of $8,000.
Parental reimbursement for childcare expenses was formerly limited to a credit of 35% of these charges, up to a maximum of $2,100 for childcare expenses for one kid and a maximum of $6,000 for daycare expenses for two children before the signing of the American Rescue Plan into law.
According to the Internal Revenue Service, “the child and dependent care tax credit is a credit that is permitted for a percentage of work-related expenses that a taxpayer incurs for the care of qualified persons to enable the taxpayer to work or look for employment.”
Families with children or dependents enrolled in daycare or other types of qualifying care may be able to claim a few thousand dollars in additional tax deductions on their tax returns this year. This might be a significant benefit for many families given the present prices of childcare in the United States; nevertheless, it’s crucial to understand who may or may not be eligible for the tax credit before putting your money at the risk of being taken advantage of.
Who Is Eligible to Claim This Additional Tax Credit Benefit?
Similar to the other Child Tax Credit benefits that were extended for the fiscal year 2020, there are restrictions on who is eligible to claim the credit for child and dependent care expenses to avoid double taxation. If you want to use this benefit to lower your tax burden, you must first determine whether or not you qualify.
According to IRS standards, taxpayers who hired someone to care for their qualifying child, children, or dependents to work or look for a job in 2021 may be eligible to claim this credit. An eligible individual is someone who meets the following criteria:
- A youngster under the age of thirteen
- A partner who is incapable of taking care of themselves
- A person who is unable to care for themselves.
It’s worth noting that because the child and dependent care credit is a nonrefundable credit, it’s only available to taxpayers with taxable income. This tax credit is not available to nonfilers or those who are not required to file taxes owing to a lack of income.
It’s also worth noting that if you’re claiming the credit for a child under 13, they had to be your legal dependent at the time the care was delivered. Only the custodial parent is entitled to claim this credit if you share custody with another individual.
There are some additional requirements to complete if you want to claim the tax credit for an adult-dependent or spouse who was physically or mentally incapable of caring for themselves.
How to Make a Claim for a Tax Credit
While you must meet the tax credit’s requirements, the good news is that claiming the benefit is straightforward. To benefit from this credit, all you have to do is claim it on your taxes. This benefit is a nonrefundable credit, and the only way to collect it is to submit it on your 2021 tax return.
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