2021 Family Tax Credits (Earned Income, Child & Dependent Care Tax Credit)

The 2021 tax season is fast approaching. Soon, those of us in the United States will sit down and figure out how much we paid in taxes during the 2020 tax year. What a crazy year it’s been with the pandemic, recession, and election. Let’s take a look at the family-focused tax breaks for 2021 and see what’s changed.

According to Bankrate, 2019’s average tax return was $2,899.

If you earned an income during 2020, these are the income guidelines and credit amounts to claim the Earned Income Tax Credit and Child Tax Credit when you file your taxes in 2021.  

All of the facts and figures presented here are sourced directly from the IRS website.

Family Tax Credits for 2021

  • Earned Income Tax Credit (EITC)

  • Child and Dependent Care Credit

  • Child Tax Credit

Earned Income Tax Credit?

The Earned Income Tax Credit (EITC) is a tax credit available to many Americans that have a low to moderate-income level. Those that fall under the earned income thresholds may qualify for a tax credit.

Earned Income Tax Credit Table

Image of the Earned Income Tax Credit Table for 2019 tax year. Source.

Earned Income Tax Credit Refundable Amount

  • $6,728 with three or more qualifying children

  • $5,980 with two qualifying children

  • $3,618 with one qualifying child

  • $543 with no qualifying children

Child Tax Credit (CTC)?

The Child Tax Credit (CTC) is a tax credit for having children. The maximum amount of the CTC is $2,000 per qualifying child and the additional child tax credit (ACTC) is $1,400 per qualifying child.

How to Qualify for the Child Tax Credit

The earned income minimum for the Child Tax Credit is $2,500, meaning you must have earned at least this much to qualify for the tax credit.

A child qualifies you for the CTC if the child meets all of the following conditions:

  1. The child is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half brother, half-sister, or a descendant of any of them (for example, your grandchild, niece, or nephew).

  2. The child was under age 17 at the end of 2020.

  3. The child did not provide over half of his or her own support for 2020.

  4. The child lived with you for more than half of 2020 (see Exceptions to time lived with you, later).

  5. The child is claimed as a dependent on your return. See Pub. 501 for more information about claiming someone as a dependent.

  6. The child does not file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid).

  7. The child was a U.S. citizen, U.S. national, or U.S. resident alien. For more information, see Pub. 519, U.S. Tax Guide for Aliens. If the child was adopted, see Adopted child, later

Read the source: Child Tax Credit Publication 972.

Child and Dependent Care Credit

The Child and Dependent Care Credit is claimable for the expenses associated with care for your kiddos. If you have children under the age of 13, and you pay a service to care for them, then you may qualify. If your child is disabled, there is no age limit.

The Child and Dependent Care Credit is designed to recover up to 25% of dependent care costs up to a maximum of:

  • $3,000 for one child ($1,050 credit)

  • $6,000 for two or more children ($2,100 credit)

In order to claim this cred, you must have been working or looking for work during the tax year and the person caring for your children cannot be a dependent of yours.

Read the source: Child and Dependent Care Credit Publication 602

Summary

If you have a family or think that you may qualify for the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) then you should ask your tax professional to see if you qualify.

File Your Taxes ASAP!

You don’t want to procrastinate on your taxes. If you get a refund, that’s money you can put to work today. If you owe money, that’s a debt you can take care of today. You definitely don’t want to be giving the government an interest-free loan. Click on the Turbo Tax offer in the picture (affiliate link) and use one of the most reputable names in tax service.

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