Plus Relocation

How might relocation impact COVID-19 child tax credit stimulus payments?

Relocation benefits can effect whether someone is eligible for the child tax credit. Senior Director of Operational Analysis Angela Sieber breaks it down in this Relo Tip Tuesday.

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Complete transcript: “Hi, I’m Angela Sieber, and welcome to Relo Tip Tuesday. My question is, ‘How might relocation impact COVID-19 child tax credit stimulus payments?’

In March of 2021, the U.S. government signed into law the ‘American Rescue Plan’ and included in that plan is an expanded child tax credit. First, the amount per child was increased from $2,000 to $3,000 per child, or $3,600 for children under 6. It also increased the covered age from 16 to 17. This tax relief is actually a pre-payment of up to half of the expected child tax credit that would normally be received when taxes are filed in the next year. Let’s look at how relocation might impact these payments.

Let’s assume we have a single employee with two children who relocated in 2021, their adjusted gross income is $85,000 and they had taxable relocation benefits of $30,000. The threshold to receive the full credit for a family with a single parent is $112,500 of adjusted gross income. You can see how the taxable relocation expenses have pushed this employee’s adjusted gross income over the $112,500 threshold, and as a result, they will not be eligible to receive the increased amount of the child tax credit as their income now exceeds the limit.

There are many variables that factor into a relocating employee and their eligibility to receive the expanded child tax credit. If you receive questions from relocating employees, it’s important to direct them to a tax provider so they can receive information on whether relocation has, or has not, impacted their ability to receive the credit. If relocation has impacted their ability to receive the expanded credit, you will need to decide as a company if this is something that you would cover. You can talk to a relocation company about some different options here. Thanks for watching.”