In this episode of The Standard Deduction (they’re certain their kids will just love it), Tax Directors Candace Varner and Ben Hake explain and discuss the nuances of the Child Tax Credit which was expanded in 2021. They tell you what you need to know about eligibility, opting out and navigating the account creation process on the IRS website.
The Standard Deduction podcast is hosted by Tax Directors Candace Varner and Ben Hake. This podcast is a thoughtful, informed discussion about ideas, trends and developments in taxes related to personal wealth management.
Our mission is to educate and inspire people to make better financial choices through knowledge, tools and strategies. We believe that education and planning are key components of financial success. Come explore relevant financial topics with our team.
Important Legal Disclosure:
Have questions or topic suggestions?
Email us @ [email protected]
Candace Varner: Hello and welcome to The Standard Deduction. I’m Candace Varner.
Ben Hake: And I am Ben Hake. As some of our longtime listeners may be aware, our children are some of our biggest fans and today’s podcast is, in many ways, dedicated to them as we are talking about the Child Tax Credit.
Candace: An exciting topic. I’m sure my kids will love this episode. The Child Tax Credit has actually existed for quite a while. Before 2017, it was $1,200 per child and there were lower thresholds. Then, as part of the Tax Cuts and Jobs Act in 2017 expanded it to $2,000 per child and increased the income threshold, making a lot more taxpayers eligible for it. Then in 2020, the credit was $2,000 still and it was per child under age 17. It phases out when your AGI is over $200,000 if you’re single or $400,000 if you’re married filing jointly. That was for 2020 returns, if anyone is still filing those or years before that.
Before we go any further, I want to clarify for everyone what a credit is versus a deduction. This is a common mix-up, I would say. A credit is dollar for dollar, reducing your tax. If before this credit, you owed $5,000 and you got a $1,000 child tax credit, now you owe $4,000. As opposed to a deduction which would lower the taxable income, which is then multiplied by your tax rate, so this is actual dollars that we’re talking about. It can add up to quite a bit, depending on your income and the number of kids you have. Ben, what’s changed for this going into 2021?
Ben: In March of this year, Congress and the President had passed the American Rescue Plan Act and that really did a bunch of things, but one of the big things that most people are going to see that’s going to really hit their pocketbo