The third stimulus package has finally passed. While the $1.9 trillion package includes $1,400 checks for eligible individuals, here’s how other aspects of the bill can affect your taxes.
Millions of Americans who received unemployment benefits during 2020 are getting tax relief. The first $10,200 of unemployment income received is NOT taxable. Therefore, if a taxpayer received $15,000 in unemployment, they are only responsible for the taxes on the remaining $4,800. This will significantly reduce the tax liability for nearly every taxpayer that has received unemployment benefits.
Child tax credit
The child tax credit has been increased to $3,000 per child--and up to $3,600 for children under the age of 6. In previous years, eligible parents were able to receive a child tax credit only up to $2,000 per child, so this is a significant increase. The qualifying age to receive this tax credit has also been raised from 16 to 17; allowing millions of additional parents to claim it. The IRS hasn’t provided information on the payment schedule as of yet, however, some could start seeing monthly or quarterly payments as soon as July.
Earned-income tax credit
For 2021 the earned-income tax credit (EITC) will be increased from the previous $543 to $1,502. However, this increased EITC will only be available to taxpayers without children (presumably due to the newly expanded child tax credit). Unless you are a full time student, the age of eligibility to claim the EITC has been reduced to 19 from 25, and the age limit cutoff of 65 has been eliminated. Millions of additional taxpayers will now qualify for this increased & expanded EITC.
I’ve already filed my 2020 taxes. Can I still get these expanded credits & benefits?
Yes! Official guidance has not yet been issued by the IRS, but most likely taxpayers who have filed their 2020 tax return before the passage of the most recent stimulus will have to file an amended return in order to claim some of these benefits. R&G Brenner Tax + Accounting can assist you.
Want to know more about how the stimulus will affect your taxes? Schedule a FREE consultation with an R&G Brenner tax professional today and we’ll make sure you receive every expanded tax credit & benefit you are entitled to.