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$3,000 - $3,600 Child Tax Credit for 2021 (Explained by a CPA) - YouTube
Channel: Logan Allec
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all right folks so i realized that i've
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been talking a lot about the 1400
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stimulus checks the timing of them kind
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of focusing on that
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last month i did talk a lot about the
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updated child tax credit
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uh that is now law along with the
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stimulus checks but i haven't really
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spent a whole lot of time talking about
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the child tax credit
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lately this month so in this video i
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thought i would just give a recap of
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this updated child tax credit for 2021
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because i know that affects many of you
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out there so first of all how did the
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bill that joe biden signed into law
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yesterday
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the american rescue plan act of 2021
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affect the child tax credit well
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i'm going to talk about the monthly
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payment option later in this video but
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first let's talk about the numbers for
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the credit as a whole
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what you need to know is that this bill
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increased the child tax credit for only
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tax year 2021.
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so for tax year 2020 it didn't make
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changes to the child tax credit
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okay and uh this bill did not
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make changes the child tax credit for
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2022 were going forward okay so for
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taxer 2020
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tax for 2022 unless congress you know
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makes these changes for 2022 as well
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it's the old rules
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two thousand dollar child tax credit for
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each qualifying child under the age of
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17
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with a maximum of fourteen hundred
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dollars per child uh being allowed to be
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refundable
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okay but for tax year 2021 only the new
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stimulus bill is saying instead of two
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thousand dollars per child
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we're increasing the child tax credit to
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three thousand dollars per child for
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children between the ages of six and 17.
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so yes now 17 year olds are eligible
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they were not
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under the old rules and three thousand
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six hundred dollars for children under
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the age of six
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and this updated child tax credit for
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tax year 2021 is fully refundable
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okay so let's say you have a kid that
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turns four in 2021 a kid that turned six
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in 2021
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and a kid that turns 17 and 20 20 21
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your 2021 child tax credit is 9 600
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3 600 for the 4 year old and 3 000 each
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uh for the other two kids okay now let's
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say your federal tax liability is only
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five thousand dollars
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married couple making let's say seventy
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thousand dollars a year w two jobs
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you might only have a five thousand
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dollar tax liability federal tax
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liability
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well the child tax credit would wipe out
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your five thousand dollar federal tax
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liability plus you get a refund check
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for forty six hundred dollars in
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addition uh you know to the refund on
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whatever federal income tax withholdings
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that were taken out during the year so
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that's huge bigger child tax credit
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and it's entirely refundable for 2021
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that obviously helps lower income
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families
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uh that perhaps previously didn't get
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the entire child tax credit
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um because a portion of it was
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non-refundable and they didn't have the
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income tax liability
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to absorb the full credit now let's talk
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about income limitations here because
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this is where things get a little more
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complicated
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and when we talk about these income
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limitations it's helpful
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to think about the 2021 child tax credit
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as having two components okay
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first is the old component the old two
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thousand dollar portion let's call that
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the base portion
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the new component is the new 1 000 uh
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dollar edition for children between the
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ages of 6 and 17 and the new 1600
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edition for children under the age of
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six so for the old portion
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the two thousand dollars the old income
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limitations apply
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those are two hundred thousand dollars
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of adjusted gross income for singles
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four hundred thousand dollars of
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adjusted gross income for married filing
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jointly taxpayers so
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if your adjusted gross income is below
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those amounts 200k
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400k depending on your filing status
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you're getting the full two thousand
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dollar
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base portion per child and i'm assuming
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that the majority of my viewers have
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incomes below those amounts
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so i'm not going to dwell on that now
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the income limitations for the new
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portion
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of the 2021 child tax credit that's the
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1 000
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edition for children between the ages of
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6 and 17 and the 1600
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edition for children under the age of
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six the income limitations here are
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similar to stimulus checks
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okay at least the first two rounds the
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third round is working a little
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differently because it has a hard
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ceiling right anyway
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if you're single and your adjusted gross
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income is seventy five thousand dollars
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or below
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or if you're head of household and your
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adjusted gross income is one hundred and
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twelve thousand
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dollars five hundred and below or if
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you're married filing jointly and your
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adjusted gross income is one hundred and
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thousand 000 or below you don't have to
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worry
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about phase-outs for any amount of the
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child tax credit okay however if your
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income is above those amounts for your
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filing status
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the amount of the expanded portion of
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the child tax credit and again this is
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just talking about the additional one
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thousand dollars for children
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between the ages of six and 17 and the
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additional sixteen hundred dollars
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for children under the age of six if
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your income is
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above those threshold amounts for your
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filing status
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your expanded portion of the child tax
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credit decreases by five cents for every
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dollar
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your adjusted gross income exceeds those
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amounts so for example let's say
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uh you're married filing jointly and
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your income for the year is one hundred
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and sixty thousand dollars
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and let's say you have a three-year-old
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so you're getting the two thousand
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dollar credit
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right you're not phased out for that
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because the phase-outs
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for the two thousand dollar piece the
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base piece begin at four hundred
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thousand dollar agi
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for married couples filing jointly but
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for the 1600
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portion for your three-year-old that's
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the 2021 edition okay for children under
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the age of six
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that is reduced for you by five cents on
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the dollar for each dollar your income
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exceeds
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the 150 000 threshold for your filing
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status so
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if your income is 160 000 your income
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exceeds the 150 000
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threshold by 10 000 so 0.05 times 10 000
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is 500 so your 1600 edition
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would be reduced by 500 okay so you
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would only be eligible
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for an eleven hundred dollar edition for
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your three-year-old
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okay so that number plus the old portion
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of two thousand dollars is thirty one
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hundred dollars
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so your child tax credit for 2021
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would be 3 100 now let's talk about the
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monthly payments
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so the monthly payment would be equal to
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your maximum child tax credit for 2021
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divided by 12
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with you claiming any amounts you did
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not receive as a monthly payment on your
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2021 tax return
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that you file in 2022. now the irs is
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shooting to get these monthly payments
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going beginning in july that's the word
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on the street however the american
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rescue plan gives them leeway to say hey
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we can't do it that early or hey you
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know monthly is going to be too
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administratively burdensome
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we're just going to do it quarterly so
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we're going to see what happens there
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irs has been pretty mum on that for now
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obviously this bill was just signed
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yesterday
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but of course i will keep my ears out
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for these things but let's say the irs
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starts with monthly payments in july
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what would this look like so for the
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example i gave previously
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a married couple expecting a
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3 100 child tax credit for 2021 they
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would
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3100 divided by 12 is about 258 dollars
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so they would be looking at receiving
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258 dollars a month
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uh beginning in july right so 258 a
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month for july
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august september october november
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december some of those monthly payments
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is one thousand five hundred and forty
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eight dollars
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so 1548 monthly payments throughout
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those months and then they would claim
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the difference
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between thirty one hundred dollars right
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their total credit
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and the amount they receive as monthly
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payments as a tax credit under 2021 tax
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return right
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so uh 1 548 a monthly payments
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right and then plus a 1 52
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credit claim on the tax return gives
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them their total credit of 3100
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so that's how that would work you will
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be able to opt out of the monthly
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payments and just claim the whole thing
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on your tax return
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if you want to all right folks that's
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what i have on that today
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obviously with the monthly payment piece
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you really just have to wait for
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guidance from the irs on that
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but thank you so much for watching i
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will see in the next video and make sure
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to check out the other two
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tax videos on the next screen
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