Everything You Need to Know About the Child Tax Credit Payments
Everything You Need to Know about the Child Tax Credit Payments
Beginning this July, approximately 39 million American households can expect to start receiving a payment from the IRS each month through the end of 2021.
The payments are an advance on the annual child tax credit, which – under normal circumstances – is factored into your annual tax return, and would be distributed as part of your tax return (if applicable). Instead, a portion of the tax credit will be delivered to eligible households throughout the course of the year, with the intention of helping families (and specifically children) who need the money right away.
WHO’S ELIGIBLE FOR THE CHILD TAX CREDIT ADVANCE?
Similar to the coronavirus stimulus payments, eligibility is based primarily on your most recent reported annual income. You may still be eligible for some amount of the tax credit if your income is over the threshold, but not the full amount.
The income cut-offs are:
- Individuals – up to $75,000
- Single parent head of household – up to $112,500
- Married couples filing jointly – up to $150,000
If you make less than the stated maximum for your filing status and you claimed an eligible child on your tax return, you should expect to receive your first payment on July 15.
It’s important to note that the credit is fully refundable. You don’t need to have earned income (or owe income tax) to qualify.
HOW MUCH WILL YOU GET FROM THE CHILD TAX CREDIT ADVANCE?
In addition to authorizing advanced payments on the credit, the American Rescue Plan of 2021 also increased the maximum tax credit amount per child. The tax credit is now $3,600 for children under 6, and $3,000 for children 6 and up. The credit amount was previously $2,000 per child.
The advance will be 50% of your total credit, spread out over 6 monthly payments. The remaining credit amount will be factored into your 2021 tax return.
Your child’s age on December 31 is key. Children who turn 18 before the end of 2021 aren’t eligible. Similarly, children who turn 6 before the end of the year won’t be eligible for the higher credit amount.
WHAT DO YOU NEED TO DO TO GET YOUR CHILD TAX CREDIT PAYMENT?
If you haven’t yet filed your 2020 tax return, be sure to do so as soon as possible. The IRS will use your 2020 return to calculate your credit amount.
If you’ve already filed your taxes, you don’t need to do anything. The IRS will make payments by direct deposit, paper check, and debit card (you will very likely receive payment the same way you received your stimulus payment).
If you don’t want to receive this advance, the IRS will be providing a way to opt out of these payments. Be sure to check IRS.gov as we get closer to July 15.