SALT LAKE CITY (ABC4) – On Thursday, Utah parents will begin to see money deposited in their accounts — technically, advanced payments for an expanded child tax credit package.
The tax credits are part of the American Rescue Plan Act, and many parents will get $250-300 per child every month for the rest of 2021.
Some, though, are wondering if taking the money now could mean tax headaches when they file next year.
So, should you opt out?
“I can’t think of anyone that should opt out of tax credits,” said Brian Decker, who founded Decker Retirement Planning.
“They’re so rare, that’s free money from the government. That’s a credit that you have for the children that you have,” added Decker.
Instead of opting out and, as he says, counting on a bigger tax return next year, he says take the money now. If you opt out of the monthly child tax credit payments, he says it’s essentially giving an interest-free loan to the government by the time you get your return in 2022.
“There’s no downside to claiming those credits,” said Decker.
Here are some of the numbers that parents should know about:
For children under 6, parents are eligible for $3,600 a child, or $300 a month.
For children 6-17, parents are eligible for $3,000 a child, or $250 a month.
Income could affect these numbers; if married, this tax credit will start to phase out when your household income is $150,000.
If you file as head of household, and are a single parent, the tax credit begins to phase out at $112,500.
If you’re above these numbers, you’re still eligible for child tax credits — just not the increases included in the American Rescue Plan Act.
Brian Decker says even if you take the money now, you’ll still get the other half as a credit next year on your 2021 taxes. He says it’s a good time to make changes to your W-9 and withhold less taxes from your current paycheck. He says taking out less now makes sense because you will have the other half of the new credit to offset your current taxable income.
“For most people, it’s going to be an offset to taxes owed. But some people, if they’re not paying much in tax and they’re in a low income bracket, this is actual cash that’s going to be coming in and they should claim it right away,” said Decker.