Last month, millions of Americans saw their bank accounts rise as they got their first installment of the Child Tax Credit (CTC) monthly payment. While the amount for each family varied, it surely came as a relief after struggling for the 18 months to make ends meet in this pandemic. There are several Americans that have reservations about the CTC because of some misconceptions that are out there. Mark Dicus & Company is here to talk about the most common misconceptions about the CTC.
How Does the Child Tax Credit Payments Work?
There is reservation in keeping these payments for some families because they are worried they will have to pay it back when tax season rolls around. If you haven’t had any big changes to your income from 2020-2021 then you should be just fine and can put the money to good use. This is simply an advance payment for the Child Tax Credit you would normally get on your income tax return.
Do Child Tax Credits Count as Taxable Income?
Just like the stimulus money that was sent to you from the Federal Government, the CTC payments are not taxable dollars either. This is no considered taxable income that you will have to pay taxes on next tax season.
What Determines how Much Child Tax Credit You Get?
The amount that you receive every month is different depending on the children in your home and their ages. The Child Tax Credit was increased this past year from $2,000 per child, to $3,000 per child between the age of 6 and 17. For any child under the age of 6, you will get $3,600 back. More of this credit is also refundable. So, depending on how many children you have that are eligible, your monthly payment could vary from other families. It is also worth noting that because of these changes, most families shouldn’t see too much of a difference when tax season rolls around.
You Can Opt Out of Child Tax Credit Payments
If you feel uncomfortable about taking the payments that are sent to you by the government for the CTC, you can always opt out of them. All it takes is a little bit of paperwork with the IRS and your money will be saved for you to take advantage of at tax season rather than trickled in throughout the year. You just need to make sure you opt out with enough time before the payment is already processed. They drop into your bank account on the 15th of every month, so you need to make sure that you opt out at least 15 days in advance.
Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
If you have questions about your taxes and the Child Tax Credit, you can rely on the professionals at Mark Dicus & Company to answer all the questions you may have. We are here to help you plan for tax season. Call us today!