On March 11, 2021, the 2021 American Rescue Plan Act (ARPA) was signed into law. This law made two changes that are significant for Kansas Child Support Calculations. It is important to note that these provisions of ARPA (and therefore the changes impacting the Kansas Guidelines) are applicable only for tax filings for the 2021 tax year. Although there is talk on capitol hill of the desire to extend these credits indefinitely, until further changes are enacted into law, the ARPA provisions expire on Jan 1, 2022.
The 2021 Kansas Child Support program is impacted by the 2021 American Rescue Plan Act because of some wording in the guidelines that state “Current tax law should be reviewed for any potential changes”. However in Missouri there is no such language and therefore the Missouri Child Support program currently requires no adjustment.
Child Tax Credit (CTC)
The 2021 ARPA made some significant changes to the child tax credit.
Per Child Credit Increase – The tax credit replaced the $2,000 per child credit for children younger than 17 with two different credits:
– Children younger than 6 (at years end) are $3,600 per child.
– Children from 6 to under 18 (at years end) are $3,000 per child
Phase Out Changes – Like the 2017 Tax Cut and Jobs Act (2017 TCJA), the credit is gradually phased-out for higher income parents, beginning at the following Adjusted Gross income thresholds:
|Tax Filing Status||Threshold|
|Joint / surviving spouse||$150,000|
|Head of Household||$112,500|
The credit is reduced by $50 for each $1,000 of the parent’s AGI over the threshold. The reduction in the credit amount is limited to the lesser of:
– the amount by which the CTC was increased under ARPA ($1,000 for each qualifying child;$1,600 for a child under six); or
– five percent of the difference in the phase-out thresholds between the 2017 TCJA and the ARPA for the same filing status.
Refundability of the credit – The Child Tax credit is now fully refundable (after the federal tax liability is satisfied) and is no longer limited to $1400 per eligible child but is instead limited to the total amount of the credit after the reduction has been applied.
Child / Dependent Care Tax Credit (CCTC)
The applicable percentage of childcare costs has changed to begin at 50% (it was 35% with the 2017 TCJA).
Applicable Percentage – The percentage drops by 1% for every $2,000 of AGI beyond $125,000 until it reaches a percentage of 20%. The percentage is then maintained at 20% until the AGI exceeds $400,000 at which point it resumes the 1% drop for every $2,000 in AGI beyond $400,000 until it reaches 0.
Dollar Limitations – The dollar limit on the amount of the credit can now not exceed the following:
– $8,000 if there is 1 qualifying child with respect to the taxpayer for such taxable year, or
– $16,000 if there are 2 or more qualifying children with respect to the taxpayer for such taxable year
Refundability of the credit – The Child Care Tax Credit is now fully refundable.
The refund amount is the amount of CCTC remaining after satisfying the federal tax liability, with a maximum refundable amount equal to the amount of the credit (applying the new $8,000/$16,000-dollar limits).
The Kansas Child Support Calculator has been updated to reflect the 2021 ARPA tax codes. During 2021, when you open a case that was saved before the release of the 2021 version, the Calculator will automatically now use the 2021 ARPA (because that is the current tax code).