DOTHAN, Ala. (WDHN) —Recently, President Joe Biden signed the American Rescue Plan Act of 2021, an economic bill that would give relief to several Americans and provide a rather large tax return in 2021.
Starting this summer, millions of parents will see huge increase with the Child Care Tax Credit Plan. The age requirement was raised from 16 to 17 years old. For every child under six years old, families will receive 36-hundred dollars and three thousand dollars for children ages 6-17.
CPA Thomas Parish explained how it will affect filing taxes next year.
“It’s going to change quite a bit from the 2020 that we’re filing now and what it does is it’s going to open up to millions of people that have children in daycare or people that have someone living in their house as a dependent,” Parish said.
Another key part of the act is how it will create a refund. In the past, the child care credit could only offset federal tax and only allowed $3,000 to be returned. Now, individuals can expect up to $8,000.
This is because the credit percentage decreased based on a person’s income. Now that number has increased to 50 percent of credit.
“In the past we were limited to 3,000 per child or 6,000 per two or more,” Parish said.
For the year 2021, that’s changed.
“Now it goes up to 8,000 per child or 16,000 for two or more so you’re looking at 50 percent of 8,000,” Parish said.