On Thursday, March 11, the president signed the American Rescue Plan Act of 2021 (ARPA) into law. The new plan includes a larger credit and increased thresholds for individuals claiming the credit on their 2021 return.
Please note that this does not affect the 2020 return but will affect 2021 returns.
- The child and dependent credit will be 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.