I am confused about how the change in the child tax credit is going to affect our 2021 taxes. We typically get a 1-2k refund each year. If we receive the monthly payments they are talking about are we going to end up owing next April because in essence we already received our refund plus some?
Previously, you received up to $2K per child. This will increase to $3K. (So if it wasn’t paid out, you could potentially get $2K more refunded). Payouts starting in July are for 1/2 of what you are eligible for, so potentially $3K will be paid out July to December.
If your refund would have been $1K, you would break even at tax time (1K possible refund + 2K extra child tax credit - 3K advanced). If your refund would have been higher, you would get back a little. If your refund would have been lower, you would owe.
You can opt out via the IRS portal and get it all refunded/credited in April 2022. We owe each year, so we will end up doing that.
Personally I am really hoping you can opt out of the automatic payments. We always are on the line of $150k adjusted and I would prefer to not have to worry if something doesn't get calculated properly.
But they said they wouldn't know if you can opt out until closer to the time and the way the IRS is going, I'm not positive it will be offered.
The 2021 child tax credit does start to phase out at over $150k, but it's a very gradual phase out (up to $400k for married).
Plus the payment is 50% of the total credit, so if your AGI increases even by tens of thousands of dollars, it just means you'll have a slightly lower remaining tax credit when you file.
There's a calculator here to figure out how much you might get:
Post by plutosmoon on Apr 26, 2021 16:42:40 GMT -5
Does anyone understand how this works for divorced parents who alternate years specifically in regard to the safe harbor? I claimed my kid in 2020, but my ex will claim in 2021. I am HoH in all years, so if I understand correctly if my agi falls below 50k, I have a safe harbor where I don't have to repay the monthly payments, but my ex can still claim the full credit? With my pretax HSA and 401k I can throw some extra in an IRA and probably get below 50k on my agi, but I'm not seeing a lot of details on the safe harbor for overpayment, but know my ex will drag me into court if it impacts his credit.
Does anyone understand how this works for divorced parents who alternate years specifically in regard to the safe harbor? I claimed my kid in 2020, but my ex will claim in 2021. I am HoH in all years, so if I understand correctly if my agi falls below 50k, I have a safe harbor where I don't have to repay the monthly payments, but my ex can still claim the full credit? With my pretax HSA and 401k I can throw some extra in an IRA and probably get below 50k on my agi, but I'm not seeing a lot of details on the safe harbor for overpayment, but know my ex will drag me into court if it impacts his credit.
Alway want to know but am finding very little info.
I’m also wondering how it works with five and under getting more money than six and up. If my kid turns six this year which amount do we get?
Bill text says "($3,600 in the case of a qualifying child who has not attained age 6 as of the close of the calendar year in which the taxable year of the taxpayer begins)". As I read that, this change is for tax year 2021, and your child cannot turn 6 before the end of 2021. [Not an accountant!]
Personally I am really hoping you can opt out of the automatic payments. We always are on the line of $150k adjusted and I would prefer to not have to worry if something doesn't get calculated properly.
But they said they wouldn't know if you can opt out until closer to the time and the way the IRS is going, I'm not positive it will be offered.
I was worried about being on the edge too, and decided if needed I can up my retirement contribution to lower my AGI.
Personally I am really hoping you can opt out of the automatic payments. We always are on the line of $150k adjusted and I would prefer to not have to worry if something doesn't get calculated properly.
But they said they wouldn't know if you can opt out until closer to the time and the way the IRS is going, I'm not positive it will be offered.
I was worried about being on the edge too, and decided if needed I can up my retirement contribution to lower my AGI.
Personally I am really hoping you can opt out of the automatic payments. We always are on the line of $150k adjusted and I would prefer to not have to worry if something doesn't get calculated properly.
But they said they wouldn't know if you can opt out until closer to the time and the way the IRS is going, I'm not positive it will be offered.
I was worried about being on the edge too, and decided if needed I can up my retirement contribution to lower my AGI.
We already max retirement. DH’s OT fluctuates a lot year to year, which makes it hard to estimate what our final numbers look like.