The Top Five Ways to Make the Most of Your Child Tax Credit in 2021
The Child Tax Credit has undergone some important changes to help families for the 2021 tax year; payments already started rolling out earlier this summer. No matter your situation, it’s advised by many experts that you should review how to spend (or save!) the new Child Tax Credit.* There are several choices available to you, and it is important to review them so you can choose the best option for your family and your taxes.
Should you keep the tax as a credit instead of a cash payment?
Opting out of advance payments means qualified taxpayers will not see a payment until after their taxes are filed in 2022. Eligible taxpayers might want to do exactly that if you:
- Would rather have the tax credit to offset the taxes you would owe.
- Think your circumstances will change and you don’t want to update your information in the IRS portal.
- If you’re concerned the payments by the IRS could cause you to owe taxes on your next tax return.
Making the Most of the Tax Payment
Once you learn all about the latest updates to the Child Tax Credit in 2021, you’ll want to make the most out of the extra cash you receive. Clark County Credit Union has a few suggestions from CNBC.com to help you prepare:
- Determine the amount you qualify for – The amount of money you’re eligible for depends on your Adjusted Gross Income, the number of children you have and their ages. Use this free child tax credit calculator to determine your qualification status.
- Know when the money is coming in – Half the amount you’ll receive is paid monthly from July until the end of 2021, so don’t assume it’s a lump sum. You will get the other half after filing your 2021 tax return in 2022.
- Make sure your financial foundation is solid – Do you have a sufficient emergency fund, the right insurance and a plan for paying down debt? Those should be the first steps to be taken with any extra money coming in. Keep your financial health in check, just as you would your physical or mental health. It’s important in securing your financial foundation.
- Keep the big picture in mind – Think about your priorities and goals for the next year and figure out how some extra cash could go toward realizing them. This will help you to be more intentional with your money.
- It’s okay to spend -- Still not sure what to do with the Child Tax Credit? It’s been a long, tough year for everyone; it’s okay to spend some of this extra money on your family and your bills, once you know your essentials are covered. And, when in doubt, you can always decide to save or invest.
For additional money saving and budgeting resources visit Banzai, CCCU’s free financial education resource.
*Always consult a tax professional. This article does not constitute tax advice.