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Child Tax Credit and Child & Dependent Care Credit


The American Rescue Plan has expanded the Child Tax Credit and the Child and Dependent Care Credit creating major tax benefits for taxpayers with dependent children.  The Child Tax Credit has been expanded from $2,000 per child under the age of 17 to $3,000 per child under the age of 18.  Children under the age of 6 qualify for a $3,600 credit.  These expanded credits begin to phase out at for single taxpayers with AGI over $75,000 and joint filers with AGI over $150,000.  Additionally, the credit has been made fully refundable and will be paid in the form of an advanced credit beginning in July of 2021 for eligible taxpayers.  Taxpayers will likely begin receiving $300 advanced credits in July via direct deposit, however the IRS is still working out the details of how they will administer this program, including designing an online portal where taxpayers can update their information or even elect out of receiving an advanced payment.

The American Rescue Plan also expanded the Child and Dependent Care Credit, making it refundable and increasing the amount of qualified expenses that are eligible for the credit.  The dollar limit on qualified childcare expenses has increased from $3,000 to $8,000 for one child, or from $6,000 to $16,000 for more than one child.  The applicable credit percentage applied to these dollar limits was increased to 50% from 35% for taxpayers with AGI of $125,000 or less, increasing the total potential credit to $4,000 for one child or $8,000 for multiple children. The applicable credit percentage begins to phase out at AGI’s above $125,000.

If you have any questions regarding these changes, please do not hesitate to contact your C&J engagement team. 


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Coulter & Justus, P.C.
Coulter & Justus, PC
(865) 637-4161
9717 Cogdill Rd, Suite 201
Knoxville, TN 37932
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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