Today, there is a piece of good news for Americans. There will be a new monthly payment allotment soon. A bill is geared toward this path, and it is geared towards families with children. Families who qualify can still claim money from the Child Tax Credit, which could amount to as much as $8,000. This is what you need to know.
How to Take Advantage of the $8,000 Child Tax Credit
According to The Motley Fool, people have been discussing how to claim the other half of the Child Tax Credit on their tax returns. However, the IRS allows claiming an $8,000 maximum credit for childcare expenses on your tax return, which is something that’s not widely discussed.
Joe Biden’s American Rescue Plan included the credit as part of its plan. Up to $8000 can be claimed as a tax credit for childcare expenses for 2021. This surmounts up to 50% of the expenses. A parent was only permitted to claim a credit of 35% of childcare expenses before the American Rescue Plan was passed, up to a maximum of $2,100 for childcare expenses for one child, or up to a maximum of $6,000 for childcare expenses for two children.
According to the IRS, “The child and dependent care tax credit is a credit allowed for a percentage of work-related expenses that a taxpayer incurs for the care of qualifying persons to enable the taxpayer to work or look for work.”
Children or dependents who are attending daycare or other eligible care services can claim an extra few thousand dollars on their tax returns this year. Childcare costs are rising rapidly in the U.S., so this credit could be of great benefit to many families. However, before you take advantage of this, it’s imperative you understand who might qualify.
For the child and dependent care expenses credit, there are stipulations regarding who can claim it, as there are for other Child Tax Credit benefits. A qualifying person is:
- A child under age 13
- A spouse who is incapable of self-care
- A dependent who is incapable of self-care
Child and dependent care is not a refundable credit, so only taxpayers with taxable income can claim it. Tax credits are not available to nonfilers or guardians without income, and who are not required to file taxes.
In addition, if anyone claims the credit for an under-13 child, he or she must be your legal dependent at the time the care was provided. Custodial parents are the only ones eligible for this credit if they share custody with another person.
There are other qualifications that you must meet if you wish to be eligible for the tax credit as an adult-dependent or a spouse who was incapable of taking care of themselves.
A Guide to Claiming Tax Credits
To qualify for this credit, you just need to claim it on your tax return. As this benefit is a nonrefundable credit, you must include it on your tax return for 2021 in order to claim it.
