Average refunds this year are up a whopping 10%. At the same time, the share of taxpayers getting paid at tax time is down. “It’s making for a very strange tax season.”
Legislation that Democrats pushed through more than a year ago in response to the pandemic is now scrambling millions of Americans’ returns, which are due by midnight Monday.And for some low-income people, doing their taxes could feel like winning the lottery. Some are seeing five-figure payments that rival their entire annual income.For some, that’s because Democrats’ signature monthly Child Tax Credit payments for the last six months of 2021 are now cutting into their refunds.
Democrats dramatically expanded the Child Tax Credit and the similarly sounding Child and Dependent Care Tax Credit, particularly for people at the bottom of the income ladder, as well as beefed up the Earned Income Tax Credit. They can also still claim last year’s $1,400 per person economic stimulus payment if they haven’t already. If they didn’t get the two stimulus payments from 2020, they can still take those too.
Those breaks are pushing up refunds for some higher earners as well, particularly for those who opted out of the monthly Child Tax Credit payments and for those who’ve had babies in the past year.That’s because money they received last year — half of the credit was distributed last year in the form of those checks — can’t be now claimed on their return. And though Democrats increased the maximum credit, some may find they now have less to claim at tax time than they did before the expansion.
“People are surprised it’s not the same rules as 2020,” said Andrew Stettner, an expert on unemployment benefits at The Century Foundation. Both benefits were limited to couples making less than $150,000. But if one spouse makes less than $75,000 — the threshold for individual taxpayers — they can now file separately and claim the breaks.
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