The IRS has modified inflation-adjusted amounts for the child tax credit (CTC), the earned income tax credit (EITC/EIC), and the applicable percentage table for Code Sec. 36B for calculating a taxpayer’s premium tax credit (PTC). The changes reflect amendments made by the American Rescue Plan Act of 2021 ( P.L. 117-2). The changes include the following:
Solely for tax years beginning in 2021, an increase in the refundable portion of the CTC under Code Sec. 24 to $3,000 for qualifying children who have attained age six but not 18 by the end of the tax year, and $3,600 for qualifying children who have not attained age six. The partial refundability provisions under Code Sec. 24(d) do not apply.
Solely for tax years beginning in 2021, temporary modification of the EITC under Code Sec. 32 to provide special rules, including, for example, special rules for eligible individuals with no qualifying children and applicable phaseout amounts.
For tax years beginning in or after 2021, modification of Code Sec. 32(i) to provide that the EITC is not available for taxpayers whose aggregate amount of disqualified income exceeds $10,000. This amount will be adjusted for inflation for taxable years beginning after December 31, 2021.
For tax years beginning in 2021 and 2022. temporary changes to the Applicable Percentage Table in Code Sec. 36B(b)(3)(A). Taxpayers use these applicable percentages to determine the amount of the PTC they may claim for a tax year.