The Earned Income Tax Credit is a credit for working families. It is a refundable tax credit, which means that it is sent as a payment even to families that don’t earn enough to pay income tax. The CTC, or Child Tax Credit, is another refundable income tax credit for families.
Both of these tax credits apply differently in Puerto Rico from the way they apply in the states, but both will be available this year to residents of the Island.
However, participation in either of these credits requires filing an income tax return.
“We are talking about more than $2.6 billion in relief for people’s pockets. It is critical that the population knows and requests both credits as soon as possible. This is a unique opportunity for families and for the economy of Puerto Rico. Now, the challenge is to achieve, in the coming months and before April 18, that all the people who qualify to receive this money request it,” said the executive director of Espacios Abiertos, Cecille Blondet.
The Child Tax Credit has previously been available in Puerto Rico only for families with three or more children. For the 2021 tax year, it will be extended to Puerto Rico for families with just one or two children, as it has been for many years in the states.
To receive this credit, families must file a federal income tax return, even if they would not normally need to file such a return. Filing this return will not cause families to be responsible for federal income tax. Instead, they will receive a payment of $3,000 for children who are ages 6 through 17 and $3,600 for children ages 5 and under.
The Earned Income Tax Credit requires filing a Puerto Rico Income Tax return. The payment, which may be up to $6,500, is for any worker age 19 and older. The exact amount will depend on income and dependents.
It is important to note that families who are eligible for both tax credits must apply for each separately on the two different tax returns.
The benefit for Puerto Rico
Open Spaces (Espacios Abiertos) estimates that more than 304,000 families could benefit this year from the Child Tax Credit (CTC) and 466,000 families from the EITC. If all eligible families receive these payments, it could bring $2.6 billion into Puerto Rico’s economy.
Statehood opponents sometimes try to scare Puerto Ricans with the specter of federal income tax. In fact, nearly half of Americans in the states do not pay any income tax, and instead receive credits like these. This would be true for most residents of Puerto Rico as well.
The goal of these tax credits is to help lift American families out of poverty and to support working families. They should apply to Puerto Rico, and they will do so once Puerto Rico is a state. As a territory, Puerto Rico will benefit from the current extension of these credits to the Island, but they can be taken away at any time.
If you live in Puerto Rico, be sure to file both federal and local income tax returns to apply for these credits.