Helping Families Access 2021 Tax Credits and Stimulus Payments

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Helping Families Access 2021 Tax Credits and Stimulus Payments

Many families continue to struggle financially due to the coronavirus disease 2019 (COVID-19) pandemic. The Federal Earned Income Tax Credit (EITC) and Child Tax Credit are among the largest Internal Revenue Service (IRS) public benefits for low-income households. The Office of Child Care (OCC) wants to ensure that families are informed about all available tax credits.

Use the resources below to help families understand the tax credits and special rules around the third Economic Impact Payments (stimulus checks) issued in March 2021. Learn about eligibility requirements and ways to access these benefits. Review information to help families find free tax preparation services for which they may be eligible.

American Rescue Plan Act’s Impact on 2021 Taxes

The American Rescue Plan Act for 2021 allows taxpayers to use their earned income from tax year 2019 or 2020, if it was higher than their 2021 income, to determine the amount of benefits they will receive from the EITC and the refundable portion of the Child Tax Credit in the 2021 tax year. This special rule will help families who experienced lower wages this year due to the COVID-19 pandemic get a larger refund that is consistent with their earnings from prior filing years.

Earned Income Tax Credit

EITC is a benefit for workers with a low to moderate income. To qualify, an individual must meet specific requirements and must file a tax return. If a family owes taxes, EITC can reduce the amount they owe. In other instances, EITC may provide a refund. Individuals must file a tax return and claim the tax credit to receive it.

January 28th Is EITC Awareness Day!

Join a national effort to increase awareness about refundable credits. Find marketing and communication materials you can use to spread the word so that families don’t miss out on eligible benefits.

Maximum Qualifying Income by Filing Status and Number of Qualifying Children Claimed (2021 Tax Year)

Filing Status

Qualifying Children Claimed

One

Two

Three or More

Single, Head of Household, or Surviving Spouse

$42,158

$47,915

$51,464

Married Filing Jointly

$48,108

$53,865

$57,414

The maximum amount of credit an individual can receive for tax year 2021 is:

  • $6,728 with three or more qualifying children
  • $5,980 with two qualifying children
  • $3,618 with one qualifying child.

Child Tax Credit and Credit for Other Dependents

The refundable Child Tax Credit may reduce a family’s taxes by as much as $3,600 for each qualifying child. Families can receive the entire tax credit for each qualifying child as the Additional Child Tax Credit even if they aren’t required to file a tax return or they don’t owe any tax. A refundable tax credit may give a family a refund even if they don’t owe any tax. Many families received half of their Child Tax Credits via monthly payments from July through December 2021. Families who did not get the monthly payments can claim them on their tax return. All families can get the remaining half of the Child Tax Credit that they are owed by filing their 2021 taxes.

Families with dependents who don’t qualify for the Child Tax Credit may be able to claim the Credit for Other Dependents. The maximum credit amount is $500 for each dependent who meets certain conditions.

Economic Impact Payments (Stimulus Checks) 

Let families know that the stimulus money received in 2021 is not considered taxable income. Families can learn more about stimulus payments and ways to reconcile their 2021 tax return on the IRS website. Families can also visit the IRS website to learn more about Economic Impact Payments or to track their payments.

Recovery Rebate Credit

The Recovery Rebate Credit is a tax credit authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-19-related Tax Relief Act. Individuals are eligible if they did not receive the full amount of the third stimulus payment in March 2021. An individual’s 2021 income tax is used to determine the amount of the Recovery Rebate Credit. If eligible, this credit can increase a tax refund or decrease the amount of tax owed. Visit the IRS website to learn more about eligibility requirements.

Free Tax Services

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who make $57,000 or less, persons with disabilities, and limited English-speaking taxpayers who need assistance in preparing their tax returns. Families can usually find VITA sites in community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. However, due to the COVID-19 pandemic, many VITA sites are closed or have switched to virtual tax return preparation for an undetermined period. To locate an open site near you, use the VITA Locator Tool or call (888) 227-7669 (toll-free).

The IRS Free File offers many online resources and tax help. Find tax forms, instructions and publications, online payment options, and more. Individuals can even prepare and file their Federal income tax online for free.

Related Resources

Explore related resources on the Early Childhood Learning and Knowledge Center website to learn more.

Upcoming EITC Events

Join us for the next Chatathon in the Chatathon Live Series.

Stay Informed

Please share this message with colleagues who may be interested in this topic. Did someone forward you this announcement? You can subscribe to receive OCC announcements via this OCC webpage.

We Want To Hear From You!

Send your questions and comments to the National Center on Parent, Family, and Community Engagement via email at pfce@ecetta.info or phone at (855) 208-0909 (toll-free).





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