On Thursday, March 11, the president signed the American Rescue Plan Act of 2021 (ARPA) into law. The new stimulus plan includes relief payments and tax provisions that will impact 2020 and 2021 returns.
The Child Care Credit has been raised to $3,000. This affects returns beginning in tax year 2021.
- The child and dependent credit is now a refundable credit for tax year 2021.
- The amount of eligible expenses increases from $3,000 to $8,000 for one child and from $6,000 to $16,000 for more than one child.
- The percentage of expenses eligible for the credit increase from 35% to 50%
- The phaseout income amounts increase from $15,000 to $125,000 capping at 20% when AGI reaches $400,000.