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Knowledge about tax credits



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Rebate points

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The most recent round of relief includes stimulus checks up to $1

,400 per person.

But it also allows people to demand payments for the first few rounds of economic impact they missed.

Technically speaking, the first two parts are $ 1,200 and $ 600 respectively, which are the advance payment of Rebate Rebate Credit in 2020.

Taxpayers who receive the full check amount are not eligible for other payments. However, if some people do not receive the first or second round of payments, or do not receive the full amount, they may be eligible for more assistance.

For example, if the U.S. Internal Revenue Service (IRS) does not have a recent tax return, it may happen. File income may disqualify families for checks, and high-income earners cannot get checks.

Suppose someone loses income in 2020 and is now eligible for checks for $1,200 and $600. The IRS may not pay this person because the agency reported higher income on the 2019 tax return.

Such a person can claim the rebate points for this payment during this year’s tax season. It will appear in the form of a tax refund.

Even if they don’t usually file tax returns, they must file 2020 tax returns.

When Americans file their taxes in 2022, the same rules will apply to the most recent $1,400 check.

Generally, the adjusted gross income is up to $75,000 for singles, up to $112,500 for heads of household, and couples who submit up to $150,000 together are eligible for full payment. These checks will gradually exceed these limits.

Child tax credit

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The American Rescue Program has made several changes to the child tax credit, including the amount and time.

Elaine Maag, chief researcher of the Urban-Brookings Tax Policy Center, who studies income support programs, said that due to the new regulations, about 80% of households with children will receive tax cuts, which brings huge benefits to low-income earners. Interests.

She said that the lowest 20% will receive an average federal tax cut of $3,270.

According to previous regulations, taxpayers can apply for a child tax credit of up to $2,000 for each child under the age of 17.

The American Rescue Plan increased the income of children under 6 to $3,600, and the income of older children to $3,000. The legislation also expanded the age of eligible children to allow credit for 17-year-olds.

This is a major shift in the way we distribute to low-income families.

Garrett Watson

Senior Policy Analyst, Tax Foundation

Individuals with an annual income of no more than $75,000, heads of households with an annual income of no more than $125,000, and married couples who have filed a joint tax return with an annual income of no more than $150,000 can enjoy full tax relief. High-income earners will gradually cancel credit.

According to data from the Congressional Research Bureau, high-income families generally receive the same benefits as the previous law (unless they have a qualified 17-year-old, in which case they will receive more).

The relief measures also make the children’s tax credits fully refundable. It can be partially refunded-taxpayers can only refund up to $1,400.

This structure benefits wealthy families to a large extent. People with lower incomes do not have to pay taxes and can only get a refund of up to $1,400, while people with higher incomes can usually demand higher value.

According to data from the US Congressional Research Bureau, approximately 19% of taxpayers who qualify for tax credits have incomes that are too low to earn the highest income.

Garrett Watson, a senior policy analyst at the Tax Foundation, said of the credit changes: “This is a major shift in the way we distribute to low-income households.”

These changes will apply to next year’s tax season, when households submit their 2021 tax returns.

In addition, legislators are trying to convert credit into a predictable source of income through advance payments starting in July this year.

Maag said this will help low-income earners ease the possibility of income fluctuations, perhaps if they engage in seasonal or part-time jobs and better manage their monthly bills.

The advance payment will be half of the family’s credit limit; the other half will be refunded during next year’s tax time. Those who submit the 2020 return will be eligible for the advance payment.

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Experts say that it is expected to be paid on a monthly basis, but may eventually be paid on a quarterly basis, depending on the management capabilities of the IRS.

Watson said the monthly cost per child could be as high as $300.

Watson said: “It’s a lot like an stimulus check, paying in advance based on this year’s tax return.

It should be noted that if the family receives an advance payment that is larger than its due, it may owe money. This may be caused by changes in income, file status or the number of children. However, there are some protection measures for low-income people.

The prepayment is an estimate based on the income tax data for 2020 (or 2019 if not available). Families can update this information on the IRS website later this year.

Income tax credit

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Income tax credits are refundable tax credits for low-income working families. Its number depends on income and the number of children.

Experts say that changes in credit lines will mainly be brought to workers without children. According to the Tax Foundation, their maximum benefit has tripled, from $543 to $1,502.

This is a function of raising income levels. At this level, taxpayers can get the maximum amount of credits, and the maximum amount of credits will begin to gradually decrease. (For non-joint filers, these levels are now $9,820 and $11,610, respectively.)

The minimum age required has been lowered from 25 to 19 years. The upper age limit (previously up to 65 years old) was abolished.

Marg said that even with these changes, most of the credit line proceeds (about 85%) will still be brought to families with children. However, this ratio is less than 97%.

Maag said that as a result of these changes, about 9% of taxpayers will receive tax cuts, and almost all those with the lowest 20% income will receive tax cuts. The average tax cut is expected to be approximately US$700.

Children and dependents credit

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The US rescue plan allows taxpayers to offset a larger share of expenses related to children and dependants.

It increases the amount of expenditures paid to qualify for credit to $8,000 for one child or dependents, and $16,000 for two or more children. (Higher than the previous 3,000 USD and 6,000 USD respectively).

The law also allows families to write off 50% of these expenses instead of 35%.

This means that taxpayers can receive up to $4,000 in credits for one child or dependents, and $8,000 in credits for two or more children. (Above US$1,050 and US$2,100, respectively.)

The law also stipulates that the credit can be refunded in full.

However, not many taxpayers will benefit. Mag said that about 13% of all families with children will receive tax cuts.

She said that because low- and middle-income families tend to rely on informal care and do not incur child care costs, benefits are biased towards the upper-middle class.

Once income reaches $400,000, credit will begin to be phased out.


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