2021 tax return items you need to be aware of

Child Tax Credit

The Child Tax Credit is increased and made fully refundable but ONLY for the 2021 tax year. The IRS has:

• Increased the amount of the credit from $2,000 to $3,000 per child ($3,600 for a child under age 6) for filers under specific AGI thresholds;

• Made the credit fully refundable (typically, only $1,400 is refundable);

• Repealed the requirement that taxpayers must have earned income of at least $2,500 in order to qualify for a refund of the credit;

• Allowed for advance payments of the credit starting July 2021; and

• Expanded the definition of a qualifying child to include children who did not turn age 18 by the end of 2021. This means for 2021 only, 17-year-olds qualify for the purpose of the credit.

Credit for other Dependents

In addition to the Child Tax Credit for qualifying children, taxpayers may also claim a dependent credit of $500 for each qualifying dependent, none of which is a refundable credit. The dependent must be a U.S. citizen, U.S. national, or U.S. resident alien.

Increased Child and Dependent Care Credit

For 2021 only, the Child and Dependent Care credit amount significantly increased by:

• Increasing the maximum credit to 50% from 35%;

• Increasing the amount of eligible expenses to $8,000 for one qualifying individual and $16,000 for more than one; and

• Increasing the AGI phaseout threshold to $125,000.

There are a lot more changes for 2021.

The office of Moats & Hebebrand CPAs makes a concerted effort to stay on top of the changes in the tax laws so you don't have to. Let us prepare your 2021 tax returns so you know they are done right! We are also open all year to assist with tax planning and to take care of our clients.