The latest Covid-19 relief package included lots of cool things. Many individuals collected their $1,400 payment but families with children will benefit the most. Not only will parents receive a $1,400 payment for each qualifying dependent but the annual child tax credit is increased from $2,000 to $3,000 for children from 6-17 and $3,600 for children under 6. It couldn't be a better time to have two 18 month old boys!
Even better news is that tax credit is fully refundable! Previously, only 70% of the $2,000 credit was refundable. That means in 2020 if you had more credit than tax owed you could only get a refund of $1,400 from the tax credit. In 2021, you will receive $3,000 or $3,600 in the same situation. This year's credit will also be advanced to qualifying tax payers in monthly payments. The goal was for the monthly payments to start going out around July and the other half of the credit was to be taken on your 2021 return. However, with the tax filing deadline being pushed back, its likely the payments will be too. Whenever the payments do come, if they even do, keep in mind whatever you receive will reduce the refundable credit you can take on your return.
Married Filing Jointly making under $400,000 with 2 kids under 6:
2020: $4,000 tax credit; $2,800 refundable
2021: $7,200 tax credit: $7,200 refundable