If both spouses work, then the credit is up to 50% of the amount spent on childcare (max credit of 4K per child) – you can take this credit for up to 2 children in childcare – so for 2 kids, the max credit is 8K and it is refundable. Your ability to enjoy this credit phases out as your joint AGI exceeds 125K If you would rather pay for childcare pre-tax, then (if your employer allows), you can defer up to $10,500 into a Dependent Care FSA, but whatever you defer into the FSA can’t be used to calculate the child care credit. Depending on your situation, a decision needs to be made whether to take advantage of the FSA deferral or the credit – let us help you make the decision.
Under previous law, your ability to get a subsidy (i.e., the government helped you pay for your Health Insurance) through the Health Insurance Marketplace phased entirely if your income exceeded 400% of the Federal Poverty Level. The new law passed in March now allows you to get a subsidy, no matter your income, to the extent that your Health Insurance Premiums obtained through the Marketplace exceed 8.5% of your income. Ask us if this applies to you and how to take advantage of this new rule.
Starting in July, the IRS will send you 1/12th of what they expect your 2021 child tax credit to be (up to $3,600 per child). They are basing their calculations off of the income and children that you claimed on your 2020 return. When you file your 2021 tax return, you will then true up with the IRS and either pay them or they will pay you any difference. If you want to unenroll from the monthly payments then go to www.irs.gov/childtaxcredit2021
Are you withholding enough tax from your wage at work? The only way to be certain is to send us your year-to-date paystubs so that we can take a look. This service is always free to our clients, so don’t hesitate to reach out.