But what if H&W’s tax bill is only $1,000 before the $4,000 credit? After 2017, up to $1,400 of the $2,000 CTC is now refundable. The refundable portion is generally capped at 15% of the excess of earned income over $2,500.H&W have total earned income of $27,500, a tax liability of $1,000 before credits, and two children resulting in a CTC of $4,000 for 2020.
There would be no more complicated calculation to determine the refundable amount of the CTC. The entire credit of $3,000 – or $3,600, if applicable — would be refundable.H&W have total earned income of $27,500, a tax liability of $1,000 before credits, and two children under the age of 6, resulting in a CTC of $4,000 and refund of $2,400 for 2020. If the bill become law as written, in 2021 the refund would rise to $6,200 .
Because President Biden has promised, however, not to increase taxes on taxpayers earning less than $400,000, the “normal” CTC of $2,000 will continue to phase out at the higher limitations in place under current law.Here’s where things get interesting. The bill would endeavor to make the CTC payable in ADVANCE during 2021. If the bill becomes law, taxpayers would receive checks from July through December of 2021 from the IRS based on the anticipated credit amount.
So while I understand that there’s a certain appeal to wrapping up a night by watching a couple of episodes of Always Sunny and passing out on the couch, you have to consider the math. If you produce a newborn before the end of 2021, the government will pay you up to $3,600 for the effort, which based on my experience, comes to approximately $1,800 per minute. That’s good work if you can get it.
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