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New Tax Rules: Child Tax Credit And Earned Income Credit



Rev. Proc. 2021-23

Table of Contents

SECTION 1. PURPOSE
SECTION 2. CHANGES
SECTION 3. 2021 INCREASED REFUNDABLE CHILD TAX CREDIT
SECTION 4. 2021 EARNED INCOME CREDIT AS MODIFIED AND SURPERSEDED
SECTION 5. APPLICABLE PERCENTAGE TABLE FOR 2021 AS MODIFIED AND SUPERSEDED
SECTION 6. EFFECT ON OTHER DOCUMENTS
SECTION 7. EFFECTIVE DATE
SECTION 8. DRAFTING INFORMATION

SECTION 1. PURPOSE


This revenue procedure supersedes sections 3.05 (Child Tax Credit) and 3.07 (Earned Income Credit) of Rev. Proc. 2020-45, 2020-46 I.R.B. 1016, and section 2.01 of Rev. Proc. 2020-36, 2020-32 I.R.B. 243 (Applicable Percentage Table for 2021), to reflect statutory amendments made by the American Rescue Plan Act of 2021, Pub.L.
No. 117-2 (ARP). Rev. Proc. 2020-45 sets forth inflation-adjusted items for 2021, for various provisions of the Internal Revenue Code of 1986 (Code). Rev. Proc. 2020-36 updates the applicable percentage table in § 36B(b)(3)(A)(i) of the Code (Applicable
Percentage Table) used to calculate a taxpayer’s premium tax credit (PTC) and the required contribution percentage used to determine whether an individual is eligible for employer-sponsored minimum essential coverage for calendar year 2021.

SECTION 2. CHANGES
.01 Solely for taxable years beginning in 2021, section 9611 of the ARP increases the child tax credit under § 24 of the Code to $3,000 for qualifying children who have attained age 6 but not 18 by the end of the 2021 taxable year, and $3,600 for qualifying children who have not attained age 6.

.02 Solely for taxable years beginning in 2021, section 9621 of the ARP temporarily modifies the Earned Income Credit (EIC) under § 32 of the Code to provide special rules, including, for example, special rules for eligible individuals with no qualifying children and applicable phaseout amounts.

.03 For taxable years beginning in or after 2021, section 9624 of the ARP modifies § 32(i) of the Code to provide that the EIC is not available for taxpayers whose aggregate amount of disqualified income exceeds $10,000. This amount will be
adjusted for inflation for taxable years beginning after December 31, 2021.

.04 For taxable years beginning in 2021 and 2022, section 9661 of the ARP Act amends the Applicable Percentage Table in § 36B(b)(3)(A) of the Code to provide temporary percentages. Taxpayers use the applicable percentages in § 36B(b)(3)(A) to determine the amount of the PTC they may claim for a taxable 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. See § 36B(c)(2)(C)(i)(ll). Consequently, the required contribution percentage of 9.83 percent for 2021 provided in section 2.02 of Rev. Proc. 2020-36 is unchanged.

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