Should I opt out of the monthly payment for child tax credit? I have no income but I gamble and I am not sure I will have enough loses to offset my winnings.

[soberjack17]

I hit a decent jackpot and am concerned my loses will not offset my winnings and thus put us over the threshold for married filling jointly.  Neither my wife or I will have any income for the year, and I know my gambling loses can be claimed up to amount of winnings.  The unfortunate thing is they (casinos) don't generally supply win loss statements until after the end of the year.  Any advice would be greatly appreciated.

[xmasbaby0]

What threshold for filing a joint return are you talking about?   There is no income threshold that prevents you from filing jointly.   

As for your wins and losses---- the losses have no effect at all unless you have enough itemized deductions to exceed your standard deduction.   Losses are an itemized deduction, just like mortgage interest or property tax, etc, so unless you have enough itemized deductions your losses will not offset the winnings at all.

https://www.irs.gov/help/ita/how-do-i-claim-my-gambling-winnings-and-or-losses

Gambling winnings are taxable income.  Losses are an itemized deduction.  If you do not have enough itemized deductions to exceed your standard deduction, your losses will have no effect.

https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/

https://ttlc.intuit.com/questions/1900352-can-i-deduct-my-gambling-losses

2021 STANDARD DEDUCTION AMOUNTS

SINGLE $12,550  (65 or older + $1700)

MARRIED FILING SEPARATELY $12,550  (65 or older + $1350)

MARRIED FILING JOINTLY $25,100  (65 or older + $1350 per spouse)

HEAD OF HOUSEHOLD  $18,800  (54 or older +$1700)

Legally Blind + $1350

And.... the child tax credit:

From this IRS site:

https://www.irs.gov/newsroom/child-tax-credit-most-eligible-families-will-automatically-receive-mont...

Who should opt out or unenroll?

Instead of receiving these advance payments, you may prefer to receive the entire credit when you file your 2021 return. The Child Tax Credit Update Portal enables you to quickly and easily do that. If you make this choice, you will either receive a larger refund or have a smaller amount due when you file.

The unenroll feature can also be helpful to any family that no longer qualifies for the Child Tax Credit or believes they will not qualify when they file their 2021 return. This could happen if, for example:

• Your income in 2021 is too high to qualify you for the credit.
• Someone else (an ex-spouse or another family member, for example) now qualifies to claim your child or children as dependents.
• You live overseas during most or all of 2021.

And some information on filing jointly or separately:

If you are legally married at the end of 2021 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $25,100 (+$1300 for each spouse 65 or older)  You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit. 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return. Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

 If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[soberjack17]

@xmasbaby0  So if I was to have gambling winnings of, say $350k and gambling loses to match it, what would I need to do concerning the child tax credit?  I have no other income to report and my wife may have around $8k to report in income.  Have always filed married filling jointly.  Thanks for the earlier reply as well.

Jack

[xmasbaby0]

The amount of child tax credit you are eligible to receive is affected by your modified adjusted gross income.  

Read the information regarding the way the credit can be phased out if your income is too high:

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

[soberjack17]

@xmasbaby0 I read it but it don't really make sense to me.  Let me expound on my situation.  I am 100% P&T disabled vet.  Receive SSDI for myself also my 9 year old daughter gets a check each month as well.  Also needed to know info, is that we are the permanent guardians for a 8 & 6 year old.  January 2022 will make 3 years. For the past 6 years my wife and I had a home based business but we shut it down last year due to the pandemic.  We showed a loss each year or a very minimal income in the 4th and 5th year.  My wife has also been employed up until last year when she was let go due to the uncertainty of if the kids were going to be able to attend school in person.  

Generally she has about 20k in w2 income.  In 2020 it was around $3,800 (she will probably have about $3,000 in W2 wages this year).  We have the ssdi we have to report and then self employed we would report but this year we won't have that.  Generally I have around $11-15k in gambling winnings and always have losses to match it.  If I remember correctly I have never itemized thru turbo tax before.  But this year will be a big difference in gambling winnings. It wouldn't be far fetched to end the year with around $350-400k in gambling winnings.  Currently, I don't have a good grasp on what my loses are due to, most casinos don't provide that info until the end of the year.  But before this year, I generally would have about $8k extra in losses over what I won.  So If I won $12k, losses would be about $20k.  I got super lucky and I hit a 6 figure jackpot early this year and I have no clue where that puts me as opposed to my losses.  

So the question still stands, should I opt out of the monthly payment for child tax credit.  The past two years our tax returns have given us a big chunk of change after filling.  I just don't won't to end up owing at the next filing deadline.  Thanks in advance.

Jack

[xmasbaby0]

You have so many things going on--and now are adding details that were not part of your original question--- that it is impossible for someone in this user forum to predict your 2021 tax situation.   You say you do not know how much your gambling losses will be.  And you have not mentioned how much tax has been withheld from all of your gambling winnings.    If you have tax due at the time that you file your tax return, the child tax credit will help to pay toward that tax debt.   If you have enough money to live on for the time being, then it might be wiser to opt out of the monthly child tax credit payments so that the credit on your tax return is more at tax time.   

To opt out of the monthly payments go to Manage Payments.

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

[fanfare]

you know you have a big gambling income and your AGI will be over $150,000

 The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:

• $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;

The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:

• $400,000 if married and filing a joint return; or

Since you will be reduced, you might have to pay back some of the credit received in advance in 2020.

[xmasbaby0]

@soberjack17 Your question was posted from TurboTax Self-Employed Live.   If you are really paying for the online Live software then you should be using the help available to you from the live CPA's and experts that are included with the extra fee you are paying for.

You are posting from TurboTax Live.  You can arrange for the Live help you are paying the extra fee for with your questions from 5 a.m. to 5 p.m. Pacific time.

https://ttlc.intuit.com/questions/4124827-how-do-i-connect-with-a-tax-expert-in-turbotax-live

[Hal_Al]

Q.  Should I opt out of the monthly payment for child tax credit? 

A. It doesn't matter, either way.

Whether you get it in advance or wait til tax time;  the child tax credit is  a a credit (of the full amount) against your calculated  tax.   Getting it, in advance, will not effect whether you owe an underpayment penalty.

It's a simple matter of: do you want the money now or later.  In your case, a gambling winning could mean taking it now might result in having to pay it back later.  But, the underpayment penalty, if any, will be the same, either way.