The new presidential administration is calling for sweeping changes in tax reform which should prompt you to schedule a meeting with your tax professional to adjust your personal and/or business strategies. Possible changes to the Child Tax Credit are coming, so you need the support of an advisor to help you navigate updates in your personal planning situation.
On the personal side, the president is calling for a temporary tax credit of $3000 per child and more will be available to those parents who have younger children. This is being called the American Rescue Plan, which is a nearly $2 trillion stimulus relief proposal. Right now the child tax credit is available at $2000 per child under the age of 17 who has a social security number and is claimed as a dependent.
In order to qualify for this credit, the child needs to live with you for at least 6 months during the year and must be related to you. The credit phases out, however, above $400,000 on a joint return or over $200,000 on a head of household or single return. For certain lower-income Americans with children, up to $1,400 of the child credit is refundable but you must also have earned income of a minimum of $2,500 to get that refund.
Right now this is proposed as an expansion of the child credit amount for one year. This will increase the credit to $3,000 per child but up to $3,600 for children under the age 6. The new proposal would make the credit completely refundable and remove the $2,500 earnings requirement. Finally, 17-year-old children qualify for the child tax credit which could be good news if you have a high school junior or senior in your house. In order to stay up to date with many of the most important changes around tax and estate planning, schedule a consultation with your tax planning professional today.