With the end of this year’s tax filing season, it is time to start planning for the next year’s tax returns and how to save money. To do proper tax planning, one has to keep in mind the changes that are being introduced now for the upcoming years. Considering, the COVID-19 situation a lot of changes were made by the policymakers in the taxation policy. We bring to you a report of all the changes that you need to know to file your tax amount next year.
2021 Child Tax credit: A report by William D King
A pandemic relief bill is signed and it includes several provisions that will impact your 2021 tax returns. One such adjustment is done in Child Tax Credit Calculator. The changes for this are quite big but are temporary. For the year 2020, the tax return for child credit was up to $2000 per child if the child is 16 years old less than 16 years. With the increase in income, it began to disappear, but for lower-income taxpayers, the child credit was refundable partially, provided they have earned income worth $2,500.
A Rescue plan by the Administration
It is a rescue plan as it provides a one-year expansion of the credit. The biggest change here is the amount which is now $3000. Earlier it used to be $2000, but for children who are 5 years or younger, it is $3,600. A report also tells us that the credit amount for the year 2021 is fully refundable and children above 17 years of age are eligible under this policy to take the credit. Also, half of the credit amount for 2021 will be in advance by the method of monthly payments.
There are certain provisions attached to this policy such as the other half of your credit you will claim when you file your 2021 tax return. One will also have to harmonize the payments that one receives from IRS for the year 2021. As per William D King, if the credit amount is greater than the total payments in that situation one can claim the excess credit on their return. On the other hand, if it is less than the payments then one may not have to pay the surplus amount back.
Indeed it is a rescue plan for the people as they have suffered a great deal in these tough times. It is rather a bold move as for the time being they apply to only the taxpayers for the year 2021. At various times there is a reference that the administration wants to take forward this policy till the year 2025 and make full use of it. They are thinking of making the credit fully refundable on a concrete basis. With these tough choices and in these hard times it is quite hard to predict whether this policy will be a success or a total failure. Only time will tell and the response of the people will be the judge of the policy.