This article will discuss how the American Rescue Plan will affect some individual 2021 taxes.

Child- and dependent-care-credit increases for 2021 only. The new law increases the amount of the credit for expenses for qualifying care. For 2021, eligible taxpayers can claim $8,000 for one qualifying individual or $16,000 for two or more qualifying individuals. A qualifying individual is a dependent under the age of 13, or a dependent of any age or spouse who is incapable of self-care who lives with the taxpayer. The adjusted gross income level at which the credit percentage starts to phase out is raised to $125,000.

Workers can set aside more in dependent care FSA. For 2021, the maximum amount of tax-free employer-provided dependent care benefits increases to $10,500, instead of the normal $5,000.

Childless EITC expanded for 2021. For 2021 only, more workers without qualifying children can qualify for the earned income tax credit (EITC), a fully refundable tax benefit that helps many low-and moderate-income workers and working families. For 2021, EITC is generally available to filers without qualifying children who are at least 19 years old with earned income below $21,430; $27,380 for spouses filing a joint return. The maximum EITC for filers with no qualifying children is $1,502.

Expanded child tax credit for 2021 only. The American Rescue Plan made several notable but temporary changes to the child tax credit:

  • Increasing the amount of the credit.
  • Making it available for qualifying children who turn age 17 in 2021.
  • Making it fully refundable for most taxpayers.
  • Allowing many taxpayers to receive half of the estimated 2021 credit, in advance.

The new law increases the credit to as much as $3,000 per child ages 6 through 17 at the end of 2021, and $3,600 per child ages 5 and under at the end of 2021. The maximum credit is available to taxpayers with a modified adjusted gross income of:

  • $75,000 or less for single filers and married persons filing separately.
  • $$112,500 or less for heads of household.
  • $150,000 or less for married couples.

Advance child tax-credit payments. From July 15, 2021 through December 2021, the IRS will advance one-half of the estimated 2021 child tax credit in monthly payments to eligible taxpayers. Taxpayers will claim the remaining child tax credit based on their 2021 information when they file their 2021 income-tax return.

This plan will put more money into the hands of taxpayers and and help to stimulate the economy.

Barry Lisak is an IRS Enrolled Agent, meaning that he has passed special U.S. Treasury Department exams that qualify him to represent clients dealing with audits or tax-resolution cases. Any questions can be directed to him at (516) TAX-SAVE, or

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