The enhanced child tax credit of 2021 is a one-time benefit payout to parents that is part of the federal government’s relief funding delivered in response to COVID-19. The child tax credit is available every year to parents, but is typically only available to parents who pay taxes.
Last year, the credit was available to all parents with children aged 17 and under who fell beneath the income threshold. Further, the credit was fully refundable and there was no need to ever pay it back. Parents whose children were born in 2020 were able to claim the credit, but now parents who had children born by the end of 2021 will also be able to claim the credit. The main requirement is an income threshold — claimants must have made less than $75,000 if filing as single or $150,000 if filing jointly.
New parents will be able to receive up to $5,000 this year based on last year’s taxes through the 2021 recovery rebate credit. The full benefit of the child tax credit for last year is $3,600 for children aged 6 and under, including newborns. Another $1,400 can be claimed through the rebate credit for dependent children — meaning you can claim your newborn for this credit as well — bringing the total to $5,000. This $1,400 payment was part of the third stimulus payment that parents were able to claim for each of their dependent children, meaning you would have missed out on the payment had your child not been born by the time you could claim them last year.
In order to receive these credits, it’s crucial that you file taxes as soon as possible for the 2021 tax year — and that you claim your newborn as a dependent, even if the baby was born in late 2021. It’s important to claim this credit now, as the enhanced child tax credit is not permanent and will revert back to its $2,000 maximum in 2023, concerning the 2022 tax year.
More From GOBankingRates