It’s that time; time to make the Advanced Child Tax Credit Decision!
You’ve heard about the upcoming advanced credits that will be paid out starting in mid-July. You can read our earlier article that explains the details and what you need to know. It’s important that you reach out to your accountant or tax advisor to make sure you are considering how these tax credits will affect you.
What to consider with the Advanced Child Tax Credit Decision
Here’s a short list of items to consider for this decision:
- Is your income the same for the 2021 tax year as it was in 2020? Or did you experience a large increase or decrease due to employment changes?
- How many children do you have and what ages are they?
- Do you normally owe money or receive a refund when you prepare your tax return?
Decision Based on Levels of Income
After researching this for our clients we have come up with a general analysis for varying levels of income and how you may want to respond to receiving these credits. Again, these are not the answers for everyone so be sure to consult your tax professional to confirm your decision.
Group #1: For Families that earn under $150,000 of annual income (Married Filing Jointly)
Based on your 2020 Tax Return, we suggest that you do begin collecting the advanced child tax credit that will be sent. Therefore, there is nothing you need to do.
Group #2: For Families that earn over $150,000 but under $400,000 of annual income (Married Filing Jointly)
We anticipate that you will be phased out from receiving the full additional child tax credit payments. However, you will still qualify for the $2,000/child credit. Since the credit has been used to reduce your tax liability in the past, we suggest that you opt-out from receiving any advance child tax payments and rather claim on your 2021 Tax Return
Group #3: For Families that earn over $400,000 of annual income (Married Filing Jointly)
You will be phased out from receiving the additional child tax credit payments and may potentially be phased out from receiving the $2,000/child credit as well. Having said that, there’s nothing that you need to do.
It’s important to remember these are simply guidelines! We hope this helps provide general guidance so you can make a decision and for these credits you’ll receive soon. This is one example of how we help our clients as questions with finances come up.
Ready to find out more?
Contact us today for a free 30-minute consultation!