The IRS issued adjusted amounts for the child tax credit, the earned income tax credit (EITC), and the premium tax credit (PTC) for 2021 to reflect changes enacted in the American Rescue Plan Act of 2021 (ARPA), P.L. 117-2.
Only for tax years beginning in 2021, Section 9611 of ARPA increases the maximum child tax credit to $3,000 for qualifying children who have attained age 6 but not 18 (the latter age an increase from 17) by the end of the 2021 tax year, and $3,600 for qualifying children who have not attained age 6. The partial refundability provisions under Sec. 24(d) do not apply to this temporary provision; i.e., the credit is generally fully refundable.
Also for tax years beginning in 2021, Section 9621 of ARPA modifies the EITC to include special rules for eligible individuals with no qualifying children (including reducing the minimum qualifying age and removing the maximum age) and higher applicable phaseout amounts. Tables with the revised phaseout amounts appear in Section 4.01 of the revenue procedure.
In a permanent provision, for tax years beginning in or after 2021, Section 9624 of ARPA modifies Sec. 32(i) to provide that the EITC is not available to taxpayers whose aggregate amount of disqualified investment income exceeds $10,000, an increase from $3,650. The new, larger amount will be adjusted for inflation for tax years beginning after Dec. 31, 2021.
For the 2021 and 2022 tax years, Section 9661 of ARPA amends the applicable percentage table for the PTC in Sec. 36B(b)(3)(A) to provide temporary percentages that are listed in the revenue procedure. Taxpayers use the percentages to determine the amount of the PTC they may claim for the tax year.
Section 9661 does not amend the required contribution percentage that a taxpayer uses to determine whether the taxpayer and members of the taxpayer's family are eligible for employer-sponsored minimum essential coverage. Therefore, the required contribution percentage of 9.83% for 2021 is unchanged.
The revenue procedure modifies and supersedes Sections 3.05 and 3.07 of Rev. Proc. 2020-45 and Section 2.01 of Rev. Proc. 2020-36 and applies to tax years beginning in 2021.
- Rev. Proc. 2021-23
— By Sally P. Schreiber, J.D., a JofA senior editor.