Expanded Child Tax Credit, In Office Notary & Student Loan Payments Resuming
We hope you have been enjoying your summer! We wanted to share information on a few time-sensitive topics which impact a number of our clients and their loved ones. Please do not hesitate to reach out to a member of the NorthAvenue team if you have any questions.
Expanded Child Tax Credits
The American Rescue Plan temporarily increased child tax credits from $2,000 to $3,000/child for children ages 6-17. However, the additional $1,000/child tax credit increase is subject to a much lower income threshold of $150,000 for Married Filing Jointly, $112,500 for Head of Household, and $75,000 for Single/Married Filing Separately. In June of this year, most Americans with children under age 18 received a letter from the IRS regarding the expanded Child Tax Credit payments they were eligible for. Notifications that the payments have started were sent out recently to those impacted. These payments are automatically direct deposited into the bank account associated with the taxpayer's most recent tax filing. For those impacted, they will receive up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6-17. These benefits are phased out for those over the income thresholds listed above. However, the American Rescue Plan states that Americans will receive 50% of their projected child tax credit, in advance, in monthly payments from July to December. These payments will be received the 15th of each month. The other half of the tax credit will be claimed when taxes are filed. There is an option to opt out of receiving these payments, even if they have already begun. You can visit the Child Tax Credit Update Portal to unenroll or update your banking information. You will need to create or use an ID.me account or IRS Username. The process will take approximately 20 minutes to complete. The payments received are based off of the IRS’s estimate of your 2021 tax credit. If a taxpayer no longer has a qualifying child but received a payment for one, the advance funds received will be added to their 2021 income tax unless they qualify for repayment protection. All information taken from the IRS website.
Sophie is a Notary!
Our new Office Manager, Sophie, is now an official Notary! If you have documents that need notarized, please bring them into the office and she will be happy to assist you. She is in the office Monday through Friday from 8am-5pm. You may reach Sophie at firstname.lastname@example.org or 614-210-3948 ext. 106 to schedule a time.
Student Loan Payments Resuming
In March of 2020, the Federal Government put in place an executive order that froze Student Loan interest rates at 0%. This freeze continued through the CARES Act and has been extended by the Trump and Biden administrations. It is scheduled to end on September 30, 2021. At that time, interest rates and student loan payments will resume.
What does the end of the freeze mean for you? You may need to revisit the type of student loan repayment plan you had previously. These questions may help you know if you need to make a change:
Given my current circumstances, does it make sense to pursue the same course of action I was on before the payment and interest freeze (i.e., Should I still plan to pay my loan down to $0)?
If I am still going to use an Income Driven Repayment (IDR) plan, is the plan I was on prior to the pandemic the right one, or is it possible a different IDR plan may be more advantageous to me now?
If I am using an IDR plan, when is the best time to recertify my income?
If your income has increased significantly throughout the pandemic, it would be most advantageous to wait to certify your income until the latest moment possible. If your income has dropped during the pandemic, it would be most advantageous to recertify as soon as possible.
Am I now eligible for Public Service Loan Forgiveness due to employment changes?
It is also important when reviewing repayment options to consider if there will be any adjustments to legislation in the upcoming months. There is sustained political pressure for Biden to extend the student loan payment suspension past the September deadline to end of March. The Biden administration is also looking into Biden’s ability to cancel student loan debt through executive action. There have been different proposals presented which would offer a range of forgiveness of student loan balances from $10,000 to $50,000, some of which include income phase-out provisions or student loan forgiveness regardless of income. The American Rescue Act paved the way for loan forgiveness by making all loan forgiveness non-taxable through 2025.
If you are planning to repay your loans down to $0 and would like to reduce your interest rate, there is the ability to refinance your Federal loan with a private agency. However, the drawbacks may outweigh the benefits as the consequences of defaulting are quicker and more severe with private loans. If the 0% interest were extended, private loans would not be eligible and you would most likely miss out on student loan forgiveness programs passed through legislation.
Information for this article was taken from Kitces.com.