Additional $8,000 Child Tax Credit Due for Parents This Tax Season; How to File Claim

Child Tax Credit Child and Dependent Care Credit 2021 American Rescue Plan enhanced Child Tax Credit Robbin Caruso Prager Metis' National Tax Controversy Practice Lisa Greene-Lewis Internal Revenue Service IRS child care expenses dependent care expenses Social Security Numbers

By Lili Scott , Parent Herald Feb 13, 07:05 pm

Photo: (Photo : ROGELIO FIGUEROA/AFP via Getty Images)

Millions of American families have taken advantage of the enhanced Child Tax Credit payments in 2021, but not many parents may be aware that they can still claim at least $8,000 when they file for taxes before April 2022.

President Joe Biden's 2021 American Rescue Plan has a provision for the Child and Dependent Care Credit that covers fully refundable child care expenses. According to CBS News, this benefit has been around since the 1970s to help parents pay off daycare expenses, after-school programs, summer camps, and dependent care expenses.

However, the Child and Dependent Care Credit was also expanded during the pandemic, just like the Child Tax Credit. Robbin Caruso of the Prager Metis' National Tax Controversy Practice said that taxpayers should not miss out on this $8,000 payment, especially with the increasing cost of child care in America.

Who's Eligible for the $8,000 Claim?

This additional payment under Child and Dependent Care Credit enables parents to get back 50 percent of their child care and dependent care when they file their taxes with the Internal Revenue Service (IRS) before April 18, 2022.

So, if the parent spent more than the estimated average of $16,000 in child care or dependent expenses for two dependents in 2021, they may get a 50 percent tax credit of that expense. Parents with a solo dependent may also file a 50 percent claim if they spent more than $8,000 in child care or dependent care last year.

Dependents under this provision should be under the age of 13 years old for child care claims, or they could be spouses and elderly family members who are physically and mentally incapable of taking care of themselves for dependent care claims. It is understood that these dependents may require full attention from the parents, spouse, or carer.

Before the pandemic, taxpayers have filed for Child and Dependent Care Credit claims for a maximum of $6,000 and get back at least 35 percent of this expense, or about $2,100 a year. CPA Lisa Greene-Lewis said that many taxpayers do not know how much this benefit increased under the 2021 American Rescue Plan.

However, as with the Child Tax Credit, this benefit has an income cap. Families who earn over $127,000 a year may claim less than 50 percent and the claimable percentages go down as the gross income increases. The tax credit does not apply to families who earn over $428,000 a year.

How to File the $8,000 Claim

Per the IRS, there is no need to apply or enroll in this program, but taxpayers have to fill out and attach Form 2441 when they file their taxes. They will have to provide the correct Social Security Numbers of each dependent.

The IRS also advises parents to have records of their expenses for child care or dependent care for the year. Other potential supporting documents that may be asked include Publication 503 and the Q3.

The expanded Child and Dependent Care Credit is good for the current tax season. Barring any changes in the law, it will revert to the usual tax credit amount next tax season.