Eastern Iowa Farmer Fall 2021

Tax changes
employer-sponsored health plans or other
qualifying coverage. The Rescue Act
eliminated the 400% ceiling for eligibility,
meaning that those with income above
400% of the federal poverty level may
qualify for a PTC if the cost of the premium
for the second lowest cost “silver plan” on
the Marketplace would exceed 8.5% of their
household income. A married couple with
no children reaches 400% of the FPL with
$69,680 of income in 2021.
In such cases, the individual or family
may be eligible for a PTC in the amount of
the difference between the actual premium
and 8.5 premium of their income. The PTC
is generally paid, in advance, directly to the
insurer. Those who receive an advance premium
tax credit must reconcile and repay
any overpayment on their 2021 return. The
PTC calculated on the return is based upon
actual 2021 income, while the advance PTC
is based upon estimated income. Those
purchasing insurance on the Marketplace
should be careful not to underestimate
income or they will be responsible to repay
any excess PTC they received in advance.
Farmers who may benefit from these
changes should go to Heathcare.gov to
explore their options. The increased credits
are available only for 2021 and 2022.
Advance Child Tax Credit
Many farmers with children have been
receiving monthly deposits in their bank
accounts since July 15. These are advance
payments of a child tax credit expanded for
2021 by the Rescue Plan. These payments
too must be reconciled on the 2021 tax return.
In some cases, however, the recipient
may be responsible to repay some of the
advance payment.
Since 2018, most parents with children
under 17 have been eligible for a $2,000
tax credit per qualifying child when they
file their tax return. Eligibility for this credit
has not begun to phase-out until modified
adjusted gross income exceeded $400,000
for married taxpayers filing a joint return
or $200,000 for other taxpayers. The
Rescue Plan expanded this credit significantly
for 2021 only. In 2021, parents
receive a credit for children who are under
18, meaning that they receive the credit
for their 17-year-old children. The credit
also is increased to $3,000 per child and
$3,600 for children under six for taxpayers
within certain income thresholds. The
increase begins to phase out where income
exceeds $150,000 for married taxpayers
and $75,000 for singles. Higher earning
taxpayers are still entitled to the $2,000
credit for each child.
The Rescue Plan also instructed IRS
to pay half of these credits to parents
in advance. Beginning July 15, eligible
parents began receiving monthly payments
of $300 for children 5 or younger and $250
for children 6 to 17. For those with higher
incomes, their advance payments are $167
per child.
Those who do not wish to receive
advance credits may “unenroll” through an
online portal available on the IRS website.
Each spouse must unenroll separately. This
unenrollment may be important because,
unlike the economic impact payments, the
advance child tax credits may have to be
repaid if an individual receives more than
the payments to which they are entitled on
their 2021 returns.
Talk to your tax preparer for more
details. n
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