Starting in July, Americans who have children aged 17 and under, will be receiving payments for the Child Tax Credit that passed legislation under the American Rescue Plan. The IRS will begin sending out monthly payments of $250 or $300 through December to qualifying families. The remaining credit due will be available as a credit when you file your 2021 taxes. The credit begins to phase out individual filers earning more than $75,000 a year and those married filing jointly at $150,000 a year. Earnings qualifications will be based on prior year tax returns and if a 2020 return has not been filed, they will rely on 2019 returns.
The American Rescue Plan expands the child tax credit to $3,600 for every child under age 6 and $3,000 for children 6-17 years old. Children 18 or full-time college students aged 19-24 will qualify for up to $500. Currently this is a one-year credit however the President and legislature are pushing for this to be made a permanent tax law.
Many individuals, especially those in lower incomes, need these funds to help pay for the rising costs in childcare and family needs. However, if you are doing well financially, we at Attentive Investments suggest you add these windfalls in funds to pad your child’s savings account or college savings. As always we are here to assist you with ideas of ways to save for your children’s future, contact us today to discuss your options.