If you had taxes withheld on jobless benefits, the federal taxes are withheld at a 10% rate. On $10,200 in jobless benefits, we're talking about $1,020 in federal taxes that would have been withheld. That's money that could go to cover what income taxes you owe — or possibly lead to a bigger federal income tax refund.
Many people didn't withhold taxes from their unemployment checks, so they're still looking at paying whatever taxes they might owe on unemployment benefits that exceed the new $10,200 waiver for singles and for each spouse on a married filing joint return.
Those who faced lengthy unemployment in 2020, though, could have received far more in benefits and could still owe some taxes on their unemployment benefits. This is just a partial tax forgiveness measure. In some cases, if people didn't have enough taxes withheld on jobless benefits, they could still face penalties and interest.
What's new with the Child Tax Credit? The changes relating to an expanded Child Tax Credit won't impact your 2020 tax return. But they will help in 2021.
The Child Tax Credit had offered a maximum of up to $2,000 per child. But under the new rules, a $3,600 child tax credit is available for newborns through 5 year old children. And a $3,000 child tax credit is available for children age 6 through 17.
Under current law, households with no income tax to offset are limited to $1,400 in refundability. But now the Child Tax Credit will be fully available and refundable to households with no income, unlike the Child Tax Credit’s current design, according to the nonprofit Tax Foundation.
There are two phase out levels based on income. Parents can receive the full credit if their adjusted gross income is less than $75,000 if single, less than $150,000 if married filing joint or less than $112,500 for head of household filers.
After that, the credit is reduced to $2,000 per child. Then the credit is phased out completely for parents with an adjusted gross income starting with $200,000 if single and $400,000 if married filing joint.
Another plus: Families would not have to wait until next year when they file their 2021 federal income tax returns. Instead, they would be able to get checks of up to $300 per child per month beginning later in the second half of this year.
(Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at [email protected]) Distributed by Tribune Content Agency, LLC.