More than 36 million eligible American families are expected to receive monthly child tax credit payments slated to start on July 15.
The expanded Child Tax Credit was authorized by the American Rescue Plan Act, enacted by lawmakers in March 2021. Families may be eligible based on information from their 2019 or 2020 federal income tax returns or details provided by using the non-filers tool on IRS.gov last year to register for an economic impact payment.
The IRS reports that eligible families should begin receiving advance payments either by direct deposit or check. Payments will be up to $300 per month for each qualifying child under age 6 and up to $250 per month for each qualifying child ages 6 to 17.
2021 Child Tax Credit Changes
The American Rescue Plan has raised the maximum annual child tax credit in 2021 to $3,600 for qualifying children under the age of 6 and to $3,000 per child for qualifying children between ages 6 and 17. Before 2021, the credit was up to $2,000 per eligible child, and those 17 and older did not qualify for the credit.
The new maximum credit is available to U.S. taxpayers with a modified adjusted gross income of:
• $75,000 or less for singles
• $112,500 or less for heads of household
• $150,000 or less for married couples filing a joint return and qualified widows and widowers
For those who earn above the income thresholds, the extra amount higher than the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every extra $1,000 in modified adjusted gross income.
The entire child credit is fully refundable for 2021. That means eligible families can still get the child care credit even if they owe no federal income tax. Before this year, the refundable portion was limited to $1,400 per child.
When will the payments go out?
Mark your calendars. The additional advance payments in 2021 can be expected on August 13; September 15; October 15; November 15; and December15, according to the IRS.
Plans call for a second IRS letter to be mailed soon that estimates how much qualifying families should receive monthly from July through December 2021.
What families need to do?
If you already filed taxes for 2020 and 2019, sit tight. Most families who qualify don’t need to take action to get their payment. Typically, the IRS will calculate payment amounts based on 2020 tax returns. If that return hasn’t been filed or processed, the IRS says it will use your 2019 return to determine the payment.
Late tax filers, get to it!
Remember the slow roll-out of first-round stimulus payments in 2020? If you haven’t filed taxes in 2019 or 2020 and you should have, don’t wait. Filing tax returns promptly ensures the IRS has up-to-date banking information for you and details about your qualifying children.
You can opt out
The IRS has an online portal where families will be able to un-enroll from receiving the advance payments this year. Instead, they can choose to get the full amount of the credit when they file their 2021 return in 2022.
Additional tools and online resources are available to help families navigate the advance child tax credit. Visit https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021 for the child tax credit update portal to notify the IRS of changes in income, filing status, or number of qualifying children; update direct deposit information and make other changes.
How has the Child Tax Credit (CTC) changed in 2021?
The Child Tax Credit (CTC) is nothing new to many parents—they claim it every year on their taxes. However, there are three key changes that the American Rescue Plan Act brought about:
1. The size of the tax credit was expanded, so families get a much bigger credit this year.
2. The credit is now fully refundable, so you don’t need to make a minimum income to qualify.
3. There are six months of payment advances that parents can receive, which start July 15.
How much money can I get from the Child Tax Credit in 2021?
This depends on the age of the child dependents living in your home. Families receive:
• $3,000 for each child dependent age 6-17
• $3,600 for each child dependent under age 6
How do I know if I qualify for the Advance Child Tax Credit?
Qualifying for the Advance Child Tax Credit depends on two things:
1. Your income
2. Having a qualifying child dependent in your household
How will the IRS determine who is eligible for Advance Child Tax Credit payments?
The primary way that the IRS is determining who is eligible is based on income tax returns. If you filed your 2020 tax returns and your income falls below the limits listed in the previous question, you qualify automatically. If you haven’t filed your 2020 tax returns, the IRS will also use 2019 tax returns.
When and how will I receive my Child Tax Credit payment advances?
The advances will occur monthly starting on July 15 through December of this year.
Can I opt-out of the advance payments for the Child Tax Credit?
Yes. The IRS has an online portal where parents can opt-out of receiving these advance payments. You will still be able to claim the child tax credit on your 2021 income tax returns. https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
This blog is available for Granite State Credit Union members through CreditSavvy, in partnership with, and powered, by SavvyMoney. To learn more about CreditSavvy click here: https://www.gscu.org/learn/creditsavvy.html