Surprise! You Might Get An $8,000 Stimulus Payment
By Dave Basner
July 1, 2021
When President Biden signed the American Rescue Plan into law in March, all the headlines were about the $1,400 stimulus check included in the relief package that would be sent out to millions of Americans. More recently, there have been stories about the Federal Child Tax Credit, which will provide $3,000 to $3,600 in stimulus to eligible parents starting on July 15th. But there is actually another way the American Rescue Plan will help those struggling financially, and this one is worth up to $8,000.
It's thanks to the Child and Dependent Care Credit which the American Rescue Plan expands. The expansion of the credit is only for this year and it provides a break for eligible parents, giving them up to 50% of as much as $8,000 in child care costs for a child under 13, or costs related to a spouse, parent or other dependent who is unable to care for themselves. The amount goes up to 50% of $16,000 if there are two or more dependents. That means a stimulus payment of up to $8,000 as a tax credit.
So who can get it? Any family making less than $125,000 can get the full benefit, while families making between $125,001 and $183,001 will get 20% of up to $16,000, or a max of $3,200. Also, you must have earned money from a job this year to qualify, and spent money on the care of the dependent so that you could work or look for work. Unfortunately, being a full-time student doesn't count as "working."
Keep in mind, this is a tax credit, not a deduction. The difference is that a tax deduction of $8,000 might reduce your tax bill by $1,000, but a tax credit is dollar for dollar, so a credit of $8,000 will reduce your tax bill by $8,000.
Be sure to keep the Child and Dependent Care Credit in mind for when you file next year. You can learn more here.