With June officially behind us, it’s time to face the facts: we’re headed toward the second half of 2021. While there’s still plenty of time to enjoy the rest of summer, we encourage you to slow down and check up on your financial well-being.
Take some time to evaluate your financial standings as we prepare for the second half of the year. Remember, we’re always here if you need assistance reassessing or working towards your financial goals.
Review your budget:
Your spending habits likely look different now than they did in 2020, but did you adjust your yearly budget accordingly? The second half of the year can be expensive, between the holiday season and back-to-school spending. Take some time now to prepare.
Check your credit score:
If you plan on moving, purchasing a car, or taking out a personal loan this year, you’ll want your credit score in good shape. Your score could have been impacted by recently accrued debt, late payments, hard credit inquiries, identity theft, and more. We also advise you check your credit report for any inaccuracies. You can do this for free through www.annualcreditreport.com
Prepare for the advance child tax credits:
If you have children under 17, this is big news! If you qualify, based on your income, you may begin receiving advance child tax credits in July.
For 2021, the Child Tax Credit provides a credit of up to4:
- $3,600 per child under age 6
- $3,000 per child from ages 6 to 17.
Rather than getting the credit at tax time, a portion will also be sent monthly throughout the year starting in July.
Other dependents—including children aged 18 and full-time college students ages 19–24—can receive a nonrefundable credit of up to $500 each.
Families who qualify, based on income, are expected to receive six installments via direct deposit or mailed check. If you anticipate getting the credit, you may want to talk about smart ways to use the money, such as saving in a 529 college plan.
Potential Pitfall!
However, there are some potential tax issues to be aware of! If you tend to owe a small amount of taxes at tax time, you may end up owing a little more. Likewise, if you normally get a small refund, that refund may decrease. This is because a portion of the credit you would normally claim at tax time is being sent to you in advance.
For example, let's say you have one child under the age of 6. Under previous tax law, you would claim a $2,000 credit at tax time. However, in 2021, you are eligible for $3,600. You'll be receiving $300 a month for 6 months, $1,800 total. At tax time, that only leaves $1,800 of credit to use for your tax return when you were used to getting $2,000. There is $200 less in credits for you at tax time which will impact how much you owe or are getting in a refund. The more children you have, the greater this amplifies the potential issue.
If you'd like to calculate your potential credit or read more on the topic, here is a helpful website - Child Tax Credit 2021: Advance FAQs & Calculator.Please call us if you have any questions.