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1 1 (January 25, 2022)

handle is hein.crs/govefec0001 and id is 1 raw text is: Congressional Researh Service ~~ lnformring the legislative debate ince 1914 January 25, 2022 Refundable Tax Credits for Families in 2021 The American Rescue Plan Act (ARPA; P.L. 117-2 ) expanded three tax credits available to families for 2021 (i.e., credits generally claimed on 2021 federal income tax returns). Kev aspects of these credits are summarized below. AKVA increased the child tax credit for low- and moderate-income taxpayers for 2021 by making the credit fully refundable and increasing the credit amount (as well as increasing the maximum eligibility age). The law also provides that part of the credit be advanced before taxes are filed. Some of the changes are highlighted in the chart below, which illustrates the relationship between the credit amount (vertical axis) and taxpayer income (horizontal axis) in 2021 before and after ARPA. Child Tax Credit for 2021* $4,0 c ARPA $2,000 $O s $20(,000 $4cn 0o0Q *Asumesyoungcrin nmnrrehdcaupiewhofke MAtVA increased the child and dependent care credit (CDCTC) for workers with child and dependent care expenses for 2021 by increasing the credit rate, increasing the cap on eligible expenses, and making the credit refundable. Some of the changes are highlighted in the chart below, which illustrates the relationship between the credit amount (vertical axis) and taxpayer income (horizontal axis) in 2021 before and after ARPA. CDCTC for 2021* $200 <2',½ $000 Assumes1 y :ungchdand maxiimumnquetyng expenses _-..} AKA increased the earned income tax credit (EITC) for low-income workers without qualifying children (i.e., childless EITC) for 2021 by increasing the credit rate, increasing the phaseout rate, and modifying the range of income over which the credit phases in and phases out (resulting in a larger maximum credit). Some of the changes are highlighted in the chart below, which illustrates the relationship between the credit amount (vertical axis) and taxpayer income (horizontal axis) in 2021 before and after ARPA. Childless EITC for 2021* $2,00G, , ~i,5G0 ,1000 $50o $0 ArP Assumes unmarjed taxpayer h- no qua ing childrn. A refundable tax credit available to A refundable tax credit available to A refundable tax credit available to families with qualifying children under 18 working families with qualifying working families. years old for 2021. The credit is fully individuals and dependent care expenses The credit amount depends on the refundable in 2021, meaning eligible low- for 2021. taxpayer's earned income, number of income families can receive the full or The credit amount depends on the qualifying children, and marital status. maximum amount of the credit, amount of out-of-pocket expenses the irrespective of their earned income. taxpayer incurred for the care of a The credit amount depends on the qualifying individual so that the taxpayer number and age of qualifying children, and can work. Generally, qualifying individuals for higher-income taxpayers subject to the are dependent children under 13 years credit's phaseout, their marital status and old or certain adults incapable of self- income for 2021 (i.e., as provided on 2021 care. income tax returns). (Note: Refundable for 2021 only.) Maximum credit for 2021 is Maximum credit for 2021 is Maximum credit for 2021 for those with $3,00 per young child (0-5 years 4 O for a taxpayer with one * 0 children: $1,502 old) qualifying individual and maximum I child: $3,618 $3,OOO per oldcr child (6-17 years qualifying expenses ($8,000) . 2 children: $5,980 old) $8,000 for a taxpayer with two or * 3+ children: $6,728 Summed over the number of qualifying more qualifying individuals and (Note: ARPA temporarily expanded the EITC children. maximum qualifying expenses ($1 6,000) for taxpayers with no qualifying children for https://crsreports~congress~gov

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