While there are people who are yet to receive the latest $1,400 stimulus check after the bill was passed in March, there’s now talk of an additional round of payments. While this round of payments will not be coming in as a check – at least, not at first – it will come in the form of tax credits, and Americans could get up to $8,000 if they qualify.
This tax credit will lower what you owe the IRS this year if you have payments that are related to the care of a dependent. If you currently care for one child or any other dependent, you could claim $8,000 in expenses. If you care for more than one dependent, you can claim up to $16,000.
This tax credit is refundable, and you would claim it at the time of filing your tax return for 2021. Here’s how it works: if you are currently spending $16,000 or more caring for your dependent and you owe the IRS a sum of $4,000, the debt you owe is eliminated and will get a tax credit of $4,000.
It is also worth noting that a lot more people will qualify for this tax credit, given that the adjusted gross income at which the credit percentage will be reduced has been increased significantly from $15,000 to $125,000.
According to the IRS, “Above $125,000, the 50% credit percentage is reduced as income rises, plateauing at a 20% rate for taxpayers with an AGI above $183,000. The credit percentage level remains at 20% until reaching $400,000 and is then phased out above that level. It is completely unavailable for any taxpayer with AGI exceeding $438,000.”
There’s one limiting factor to keep in mind: this tax credit is only available for the current tax year. If you don’t claim it in 2021, you will not receive it.