For millions of American families, the new enhanced child tax credit has meant extra money on a monthly basis.
Even better, there are other tax credits that were improved during the pandemic that folks will be able to use to boost refunds, or potentially offset tax liabilities.
That’s because the child tax credit payments are just half of the total benefit, meaning that families will see the other half applied when they file their 2021 tax returns next year. Thus, getting the money early may impact tax refunds for some families.
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The other tax credits will be helpful in supporting families as some of the other [pandemic] benefits expire, said Ashley Burnside, a policy analyst at the Center for Law and Social Policy.
Here’s what families and individuals need to know.
Child and dependent care tax credit
The $1.9 trillion American Rescue plan signed in March also expanded the child and dependent care tax credit, a lesser-known benefit aimed at helping working families.
This credit – which is separate from the child tax credit – gives working parents extra help at tax time for costs associated with caring for children under the age of 13 and other eligible adult dependents.
For the 2021 tax year, the credit was expanded to $8,000 per dependent from $3,000 and is capped at $16,000 instead of $6,000. In addition, some families, depending on their income, will get the benefit as a refundable credit, meaning it will either reduce what they owe the IRS or be returned in the form of a refund.