Understanding the Advance Child Tax Credit

As we pass the halfway point of 2021, the Biden Administration has begun implementing policies that intend to offset the economic consequences resulting from the COVID-19 pandemic.

Pursuant to this effort, the Biden administration unveiled The American Rescue Plan on March 11, 2021. One of the primary components of the American Rescue Plan is an increased and advanced payment of the Child Care Tax Credit (“CTC”). In recent years, a qualifying family was entitled to receive a $2,000 credit per child; and prior to 2017, qualifying families were only eligible for a $1,000 credit per child. However, under the newly ordered CTC, every qualifying family will receive a $3,000 credit for each child between the ages of 6 and 17 and a $3,600 credit for each child under the age of 6 years old. Families with combined adjusted gross incomes over $150,000 for married filers, over $112,500 for heads of household, and over $75,000 for all other taxpayers will not be qualified for the entire amount of the tax credit, but remain eligible for a reduced rate. The credit phases out completely at $440,000 for married filing joint returns, and at $240,000 for all others.

A big advantage to the newly ordered CTC is that half of the credit can be paid to qualifying parents in advance. In a typical year, qualifying families would not receive this credit until they file their taxes the following year. Conversely, in an effort to expedite the economic recovery process, qualifying families will now receive half of the tax credit in monthly installments beginning in July of 2021. These monthly installments will be paid in the amount of $250 for each child between the ages of 6 and 17 and $300 for each child under the age of 6. Qualifying families can expect a total of six payments to be made once a month from July to December of 2021.  In addition, CTC allows the parent of a child who is turning 17 during the 2021 calendar year to receive the benefit, which was not the case in previous years.

It is important to note that these payments are an ADVANCE of the credit so keep in mind that your available CTC remaining when you file your return will be less.

Each qualifying family is automatically enrolled in the plan, so there is no additional action required to receive these benefits. However, if you do not wish to enroll in this program and elect instead to receive your full tax credit when you file your return, you can do so on the IRS website under the manage payments tab. A link to this page can be found below:

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

If you have any questions about the newly implemented CTC or any other tax policies that may arise during this recovery period, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Tax Effects of Buying and Selling Real Estate

Our clients often consult us to determine the tax effects of their pending real estate transactions. This article is intended to discuss some of the tax issues that may arise from a real estate sale.

Many of our clients are surprised to find that the State of Illinois, the county, and the municipality in which the property is located may levy a transaction tax on the sale of real estate. Some municipalities assess this tax on the purchaser in order to allow residence in their locale; some tax the seller; and some, such as the City of Chicago, tax both the seller and purchaser.

At the federal level, the government includes the profits on the sale of your personal residence as income to be declared on your personal income tax return. However, the IRS allows the first $250,000.00 in profit to be exempt from capital gains tax for a single person and $500,000.00 as being exempt for a married couple.  These exemptions result in most residential sales being a tax-free transaction for the seller.

Profits on the sale of commercial real estate are taxed in various ways depending on how long the real estate was owned prior to the sale, whether you are deemed to be in the business of selling real estate, the amount of depreciation you took during the ownership of the asset, and whether you will be deferring any of the gain pursuant to a 1031 exchange transaction.

You should always consult your tax advisor when you are considering a real estate sale so that the transaction may be structured in the most tax-efficient manner for you. Our attorneys are experienced in advising our clients in the sale and purchase in the sale of real estate, whether it is your personal home, investment property, or if you are in the business of buying and selling real estate. 

If you are in the process of buying or selling real estate and have questions regarding the tax impact, feel free to contact Glick and Trostin, LLC at 312-346-8258 for a complimentary consultation

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Estate Planning for Unmarried Couples

In today’s society, marriage is not viewed as a necessity to starting a life together. Many couples opt to cohabitate and share their lives with their partners without “involving the government”. While there are pros to not getting married, like avoiding costly and messy divorces; there are also cons. Many protections offered to married couples under the law are simply not extended to cohabitating couples. This includes the right to make health care and financial decisions on behalf of your partner, certain tax breaks, and rights to inheritance.

Under the Illinois Probate Act, even if a deceased spouse leaves no Will, the surviving spouse is eligible to inherit ½ of the deceased spouse’s estate. Additionally, if the deceased spouse does leave a Will and omits their spouse, the surviving spouse still has options to inherit under the law. The Illinois Probate Act has no such protections for unmarried couples. If either partner dies or becomes incapacitated, the surviving, or non-disabled, partner has no right to make decisions on behalf of his/her partner. Decisions about your home and other assets, your medical decisions, and even your life itself, would instead default to your next of kin. This could result in your final wishes not being met and may cause tension between your partner and family members. The best way to protect your partner and ensure your final wishes are met is to have an appropriate estate plan.

The estate plan can be as simple as drafting Power of Attorney forms designating one another to make financial and health care decisions should you become incapacitated.  To protect your partner in the event of your passing, having an estate plan that includes a Will and a Trust will ensure your remains and assets are handled in the way you desire, and your assets are distributed according to your directions. Please note, any Will can be challenged or contested by your heirs-at-law. This is why you may choose to have a Trust in order to keep your matters private, and include no-contest clauses for added protection for your partner. A carefully executed estate plan could offer you and your partner as much legal security as a married couple.

*The word “partner” as used in this article does not mean a person who has a formalized a marriage or civil union under the laws of the State of Illinois, or any other state or country, with another person.

If you have any questions about preparing an estate plan, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.