The third stimulus package, the American Rescue Plan Act, was signed into law on March 11, 2021. In addition to the third round of stimulus checks being paid directly to individuals, there were several changes that directly affect families and their taxes. While we are certainly not giving any tax advice, we have compiled the most relevant changes that families should be aware of from the third stimulus package.
The Stimulus Check
The headliner of the new Act is the Stimulus Check, which offers $1,400 in direct payments to families. For those Married Filing Jointly, the starting amount is $2,800. Unlike the previous stimulus packages, all dependent children also qualify for the $1,400 check. That amount is for individuals who earn up to $75,000 or $150,000 for those Married Filing Jointly.
The Child Tax Credit
There were a number of changes to the Child Tax Credit, although all of them are currently set temporarily for only 2021. The biggest change is that the credit increased from $2,000 to $3,000 per child. For children aged 5 and under, the credit increases to $3,600. The age cutoff for receiving the credit was also upped from 17 years old to 18.
The entire credit was also fully refundable for individuals without any income. That means that if you did not earn any income and do not own any taxes, you can get the Child Tax Credit paid directly to you as a refund. The credit is also per child, so a family with three children would receive a $9,000 credit. Again, all of those changes are currently only set to apply for the year of 2021 alone.
The Child Care Credit
The Child Care Credit covers a percentage of the total expenses you spent on child care. For 2021 only, both the percentage you are paid and the maximum expense covered has increased. Now, you can have 50% of your child care covered as a credit for up to $8,000 for one child or $16,000 for two children. This means that if you have three children and spent $16,000 on child care, you would receive $8,000 back as a credit.
This money has also become refundable for 2021, meaning that if you do not owe taxes you will receive it as a refund. For high-income taxpayers, with an AGI of $440,000 or more, the Child Care Credit does not cover any percentage. All of these changes are only for 2021, but they are intended to decrease the benefits for ultra-high-income taxpayers and hugely increase the benefits for all others.
The Earned Income Credit
The Earned Income Credit helps out people who earn some income, such as tips, but not a significant amount. For 2021, people filing as Married Filing Separately can earn the credit for the first time. The youngest possible age for eligibility was also decreased from 25 to 19 for childless individuals. You also have the option to use your 2019 income instead of your current year, if that is helpful. All of these changes are only for 2021.
At Florida Divorce Law Group, we want to make sure you stay updated on how the latest economic changes affect you directly. For any help with your family law situation, contact Florida Divorce Law Group today! We can help you gain the freedom and peace of mind you deserve!