If you have a child, the odds are pretty good that you already know about the federal Child Tax Credit.
But it’s been a busy year, so you may have missed the news that the tax credit was expanded this year to cover more Americans, and to provide more money to those already covered.
The federal American Rescue Plan Act increased the tax credit from $2,000 per child to $3,000 for children over the age of 6, and from $2,000 to $3,600 for children under the age of 6. Additionally, it raised the age limit of a qualifying child from 16 to 17. All working families will get the full credit if they make up to $150,000 for a couple or $112,500 for a family with a single parent, according to the White House’s fact sheet on the expansion.
Both the White House and the Internal Revenue Service have a lot of information about the newly expanded program. But there are so many different family situations that we still had questions. That’s why we hopped on the phone with Amber Wallin, deputy director for New Mexico Voices for Children, to get answers to a few specifics on the program.
How does this expansion stand to impact New Mexicans?
Quite a bit! Wallin said the expansion should touch 95% of New Mexico children, with more than 450,000 children in the state eligible for the credit in some form or fashion. She said her organization projects the expansion will bring about $700 million into the state and help lift around 32,000 children above the poverty line.
“Which is huge, because we’re year after year ranked near-worst in the nation in childhood poverty,” Wallin said.
Does the credit come as a lump sum or in payments?
That’s up to you. The federal expansion allows people to receive the Child Tax Credit in monthly payments for the first time, according to the White House’s fact sheet. For every child 6 to 17 years old, families will get $250 each month, and for every child under 6 years old, families will get $300 each month. The 80% who get their refunds from the IRS through direct deposit will get these payments in their bank account on the 15th of every month until the end of 2021, with others receiving it in the mail around the same time, according to the White House fact sheet.
Wallin said recipients can opt to receive the credit as a lump sum, but she advised that monthly payments may work best for many families in need.
Will the benefit be taxable by the state or federal government?
This one’s easy: Nope, it’s not taxable by either entity.
Who gets the credit when parents live apart?
Wallin said it all depends on which parent filed the tax return in 2020 (or 2019, if there’s no return on file in 2020). If two parents live apart and share custody of a child, the parent who claims the child as a dependant gets the money. Wallin said that if custody has changed since the filing date, parents must go to www.irs.gov to update their information.
“Otherwise, it’s just based on whatever the tax return showed in the most recent year … when a family filed,” she said.
Are there strings attached to how you spend the money?
Someone call NSYNC, because there are no strings attached. Wallin said the U.S. Census Bureau is collecting data on how families are spending their monthly payments, so we know that the majority of the spending is going toward food. Wallin said that’s a good sign for a state that’s long struggled with childhood food insecurity.
“We’re just glad to see that this relief is helping the families’ most basic needs,” she said.
What if you’ve never filed state or federal taxes?
In that case, I have good news and I have bad news. The good news is that parents can still be eligible even if they’ve never filed taxes if their children meet the age requirements and they meet the income requirements, Wallin said. The bad news is that the IRS doesn’t have your information, so you have to give it to them. Wallin said parents who haven’t filed taxes should go to the IRS website — IRS.gov — and apply for the credit by putting in their household income, their child’s age and other required information.
What if you’re a parent who’s under age 18, or a dependent living with extended family?
Parents who are under 18 are automatically eligible just like other parents, provided they filed taxes in 2019 or 2020. If not, the same rules apply as above. However, the credit can only be claimed by the head of the household, so parents listed as dependents won’t be eligible, and the credit would flow to whichever extended family member files as head of household. Wallin said it’s a way to ensure that kids aren’t double-counted.
Are recent immigrants and refugees eligible for the credit?
Wallin said children must have a Social Security number to be eligible for the credit. Parents don’t, but they do need an Individual Taxpayer Identification Number, a tax processing number that the IRS will issue to immigrants and other people who aren’t eligible for a Social Security number. More information about ITIN is available at www.irs.gov/individuals/individual-taxpayer-identification-number.
Can you receive the credit if you’re currently pregnant?
It depends. Wallin said parents may claim the tax credit for children born in 2021, so if your due date is after Dec. 31, you won’t be eligible for the credit this year. Parents must go to the IRS portal and sign their child up when they’re born, Wallin said.
How many years is the expanded credit in place for?
Currently, the expanded credit is only available for the 2021 tax year. However, some Congressional Democrats are working to make the expansion continue into future years. The Wall Street Journal reported last week that Democrats are still debating the duration and other details of the program.
Reach Stephen Hamway at email@example.com.
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