The increased Child Tax Credit payments in 2021 have benefited millions of American families, but many parents are unaware that they can still claim at least $8,000 in the Child Tax Credit if they file their taxes before April 2022.
The Child and Dependent Care Credit, which reimburses parents for completely refundable child care expenses, are included in President Joe Biden’s 2021 American Rescue Plan.
According to CBS News, this benefit has been in place since the 1970s to assist parents in paying for daycare expenditures, after-school programs, summer camps, and dependent care expenses, among other things.
Despite this, the Child and Dependent Care Tax Credit and the Child Tax Credit were both increased as a result of the pandemic. Specifically, Robbin Caruso of the Prager Metis’ National Tax Controversy Practice stated that individuals should not pass up the opportunity to get the $8,000 reimbursement, especially given the rising expense of child care in the United States.
Who Qualifies for the $8,000 Indemnification?
Parents who file their taxes with the Internal Revenue Service (IRS) before April 18, 2022 will be eligible to claim a 50 percent reimbursement for child and dependent care expenses incurred during the year in which the child or dependent care was provided.
A parent who spent more than the expected average of $16,000 in child care or dependent expenses for two dependents in 2021 may be eligible for a 50 percent tax credit on the excess expense.
Parents who have a single dependent may also be eligible for a 50 percent reimbursement if they spend more than $8,000 on a child or dependent care in the previous year.
If you are filing a claim for child care, your dependents should be under the age of 13; if you are filing a claim for dependent care, your dependents should be your spouse or older family members who are physically and mentally incapable of caring for themselves.
We recognize that these dependents may require the complete attention of their parents, spouse, or caregiver at all times.
Before the epidemic, taxpayers had applied for the Child and Dependent Care Credit, which allowed them to claim a maximum of $6,000 in expenses and receive a refund of at least 35 percent of those expenses, or around $2,100 per year.
According to CPA Lisa Greene-Lewis, many taxpayers are unaware of how much this benefit has increased as a result of the 2021 American Rescue Plan.
This benefit, like the Child Tax Credit, is subject to a cap based on the recipient’s income. Families earning more than $127,000 per year may be able to claim less than 50 percent of their gross income, and the claimable percentages decrease as gross income increases. Families with annual incomes in excess of $428,000 are not eligible for the tax credit.
How to File a Claim for $8,000 in Compensation
According to the IRS, there is no requirement to apply or enroll in this program; nevertheless, taxpayers must complete and attach Form 2441 to their tax returns when they submit their returns. They will be required to furnish the exact Social Security numbers for each of their dependent children.
The Internal Revenue Service also recommends that parents keep track of their spending for child care or dependent care for the entire year. In addition to Publication 503 and the Q3, there are other possible supporting documents that may be requested.
The Child and Dependent Care Credit has been extended, which is beneficial for the current tax season. If nothing changes in the legislation, the amount of the tax credit will restore to its previous level the following tax season.