Unemployment Compensation New Exclusion & The New Child Tax Credit
Last night, the IRS released more details on how to report the new exclusion of up to $10,200 (per spouse) of Unemployment Compensation.
Our goal, as always, is to make timely changes to the software. We ask for your continued patience while we analyze, implement and test the necessary software changes. We will be working diligently to incorporate this new Unemployment Compensation Exclusion Worksheet and we’ll email you again when we release the update.
In addition, we are actively working with state tax agencies to determine how states plan to address the federal tax law changes brought about by the American Rescue Plan Act of 2021. For state conformity updates, please see KB article 17148. We will update this article as we receive information from the states.
Please stay tuned for information about the Advance Premium Tax Credit (APTC) — the IRS’s first priority was the Unemployment Exclusion change and we expect more information on the APTC in the near future.
The IRS has advised that you should not yet amend returns that had Unemployment Compensation or Repayment of the Advance Premium Tax Credit. Official IRS guidance is forthcoming.
What’s Changing Under Biden’s Plan?
The American Rescue Plan will temporarily give more money to families. Here’s everything that changes:
Am I eligible for the Child Tax Credit?
Families with kids under 6 will receive up to $3,600 per child under the new COVID relief bill. Families with children aged 17 and under will receive a credit of $3,000 per child. Families with older kids are also eligible: You can claim $500 for each child aged 17 and 18, or for full-time college students between the ages of 19 and 24.
The tax credit applies to children who are considered related to you and reside with you for at least six months out of the year.
Note that though the eligibility requirements are relatively broad, higher-income families may receive a reduced credit. But married couples filing jointly with an adjusted gross income under $400,000 are eligible for the full amount, as are individuals with an AGI under $200,000.
The size of the credit will start to phase out for single people earning more than $75,000 a year, heads of household earning more than $112,500 a year and married couples earning more than $150,000 a year.