A child tax calculator is one of those rare financial tools that gives you an extra bit of information you cannot get anywhere else. Most people are afraid to check their tax liability, complete the forms or even hope they might get a refund. You can, however, use a child tax credit tool to get an idea of the credits you will receive and how they might impact your financial future. Learn more now.
What is the Child Tax Credit?
The child tax credit is a credit provided to custodial parents of minor children for the previous tax year. The credit is traditionally applied to your adjusted gross income, thus lowering your yearly tax liability.
As of 2021, the IRS is making partial payments to custodial parents prior to the end of the tax year. Parents will receive half of the credit in cash, and they may claim the other half on their 2021 tax return.
What is a Child Tax Calculator?
A child tax credit calculator allows you to enter pertinent information about your taxes and income. The calculator lets you know the credit amount you would receive for that tax year. This is a quick way to reference your potential credit so that you may continue planning your finances, investments and monthly budget going into the next fiscal year.
Benefits of the Child Tax Calculator
A child tax benefit calculator helps you:
- Better estimate your tax liability
- Understand how your custodial status impacts your tax liability
- Evaluate the change in your financial situation if you add children to the family
Is a Child Tax Calculator Perfect?
No. You should seek counsel from a Certified Public Accountant to better understand your tax situation. However, a child tax credit calculator helps you get an idea of the credits you will receive. You cannot use the calculator to file your tax return.
Who Should Use a Child Tax Calculator?
The child tax credit calculator can provide a means of analysis for many different people whose lives include children.
Parents can see how much a credit for a new child could affect their financial future. In fact, new parents can use the calculator when they want to see the impact of a new child, factoring for things like single or dual income.
Financial advisors can use such a calculator if they are not filing a tax return and simply want an estimate of what their clients might receive.
Guardians and caregivers may also use the calculator if they are eligible to claim the child as a dependent on their year-end tax return.
Additionally, parents should use a calculator tool every year as the law changes or the IRS adjusts its guidelines. You cannot—and should not—assume that last year’s rules apply to this year. Tax professionals receive continuing education and support regarding the tax code, and you should presume that changes were made in the intervening fiscal year.
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Learn More About Child Tax Credit
Learning more about the child tax credit gives you insight into your tax liability and financial situation at the end of each year. The credit may also help you better understand and plan for quarterly tax payments.
Frequently Asked Questions
How much will I get from the child tax credit?
There is no guarantee of how much you will get from the child tax credit. However, you can use a child tax calculator to estimate any credits you may receive.
What is the age for the child tax credit?
The child in question must be 17 or under at the end of the tax year for which you wish to receive a credit.