As a parent or caregiver, taking care of the children under your watch is a costly necessity. As such, the child care tax credit allotted to American taxpayers with qualifying dependent children is a huge boost to middle income Americans. It’s the one tax benefit that has helped millions of Americans with the cost of raising their child.
Originally enacted in 1997 through the Taxpayers’ Relief Act, it assisted each family with a dependent child and is now being addressed again in the American Rescue Plan Act of 2021. However, beyond having a dependent child, you’d have to qualify to become a beneficiary of the tax credit.
If you’re a taxpayer in America in need of child care support, here’s how the child care tax credit works.
How Does The Child Tax Credit Work
First off, as a taxpayer, you’ll need to have a dependent child under the age of 18 to qualify for the tax credit. This child can either be your son, daughter, foster child, sibling, step-brother or sister, your grandchild, nephew, or niece.
Also, an adopted child that’s lawfully placed under your care is treated as your child.
How Much You Can Get Per Child
As of 2020, the tax credit for a dependent child was $2,000 per child.
However, in January 2021, a new law was enacted. Increasing the child tax credit to $3,600. This additional amount was designed to help taxpayers support their families and reduce the number of American children living in poverty by 45%.
To provide immediate help, this tax credit for 2021 is available as a payment directly rather than just a future adjustment, and will be distributed to eligible taxpayers from July 15, 2021, monthly.
Families with qualifying dependents of ages 6-17 get to receive tax credits of $3,000 per child with an advanced payment of $250 monthly. While families with qualifying dependents under age six, including (newborns) receive $3,600 per child in the form of a $300 monthly payment.
While there are exceptions to the rules. Families with dependents 18-24 years old can also earn a child care tax credit. Although, it will only be a one-time check of $500 which will be given to them by 2022.
How To Qualify For The Child Tax Credit
Not all families are eligible to qualify for the child tax credit. However, here’s how you can take advantage of the tax credit:
- If your gross income is under $75,000 as a single parent, under $150,000 for couples filing jointly, and $112,500 as head of the household filers
- You must have provided at least half of the child’s support for the previous year
- The child must have lived with you also for a minimum of 6 months (although there are a few exceptions to this rule)
Note that the child cannot file for a tax return or claim a refund. Also, to take the child tax credit for the 2021 tax year, your child has to be 17 years or less by December 31, 2021.