Automatic Payments for the Child Tax Credit Start on July 15th – Here’s What You Need To Know
So what is the child tax credit and how is it changing?
Traditionally, the child tax credit provides parents a credit on their taxes for each child under 17. If your tax credit exceeds the amount of taxes owed, you get a refund. In the past, parents were entitled to $2,000 credit for each minor child as long as they earned at least $2,500. The maximum amount eligible for refund was $1,400.
The new child tax credit:
- Increases the amount of money parents receive; and
- Gives parents an advance of this credit by sending out 6 monthly payments starting in July 2021. (the other half of the credit will be in the traditional form of a credit on your taxes; and
- Waives the earning requirement so that unemployed parents can receive the benefit.
How much are the advance payments?
Maximum advance payment for 2021 child tax credit
|Age of child||Maximum monthly payment|
|0-5 years old||$300 per child|
|6-17 years old||$250 per child|
Your maximum child tax credit depends on the age of your children.
- Parents and guardians with a child age five or younger can receive a maximum credit of $3,600 per child in that age range.
- The maximum credit is $3,000 per child who’s between the ages of six and 17.
As an example, the maximum possible credit for a parent with a five-year-old child and an eight-year-old child would be $6,600 ($3,600 for the five-year-old plus $3,000 for the eight-year-old).
Why did this change?
As part of the American Rescue Plan Act, the expansion to the Child Tax Credit gives more money to more families within children in an effort to offset the financial hardships caused by the COVID-19 Pandemic.
Am I eligible?
- Must have a qualifying child
- A legal dependent who is 17 or younger (as of 12/31/21)
- Child(ren) must have a social security number (children with ITINs are not eligible)
- Must have a main home in the US for at least half the year
- Must be below certain income thresholds
- Depends on your tax filing status and your modified adjusted gross income
- You will get the full amount if your income is below:
- $150,000 married filing jointly
- $112,500 head of household
- $75,000 single or married filing separately
- You will get a reduced amount if your income is up to:
- $400,000 married filing jointly
- $200,000 for all other filing statuses
- Must have filed taxes or provided information to the IRS
CHECK YOUR ELIGIBILITY: Advance Child Tax Credit Eligibility Assistant
When will I receive the advance payments?
Payments will be automatically (for the most part) sent out to households on July 15th and then monthly after that through December 15th. You can claim the other half of your child tax credit when you file your 2021 taxes (in early 2022).
READ MORE: See how the Child Tax Credit works for families like yours: www.childtaxcredit.gov
Do I need to do anything to get the monthly advance payments?
You need to take action if you :
- Are required to file taxes but have not done so for 2019 or 2020.
- What action do I take? FILE YOUR TAXES
- Are not required to file taxes and you did not provide information to the IRS to get your stimulus payment.
- What action do I take? USE THE IRS CHILD TAX CREDIT NON-FILER SIGN-UP TOOL
- Want to update your information or opt out of monthly payments.
- What action do I take? USE THE IRS CHILD TAX CREDIT UPDATE PORTAL
Why would I opt out?
There are certain situations where you may want to consider opting out of the child tax credit advance payments:
- You expect your 2021 income to be above the CTC income limits.
- You claimed a dependent on your last tax return but won’t claim them on your 2021 taxes.
- You usually owe a tax bill when you file taxes. In certain situations, people who usually owe taxes at the end of the year or receive a small tax refund could end up owing more if they get advance payments and don’t update their W-4 from 2020. (See information below about updating your W-4.)
- You prefer to receive your tax credit as one lump sum on your tax return instead of throughout the year.
How do I opt out of the advance payments?
You can opt-out of the advance child tax credit payments using the Child Tax Credit Update Portal. Using the portal requires you to have an IRS username or an ID.me account, which you can create if you don’t already have one. You will need photo identification when creating an account.
Do I need to pay tax on my advance payments?
No, these payments aren’t taxable income.
Will I need to repay the advance payments?
You could have to repay your advance payments if you end up receiving more than you are eligible for. This may happen to you if your income increases greatly from 2020 to 2021 or if you end up claiming fewer dependents on your 2021 taxes than you expected.
For example, you may have to repay excess credit if you lose custody of a child during the year and can no longer claim them as a dependent for 2021, but you still receive advance payments based on having that dependent.
Do older dependents qualify for advance payments?
No. Adult dependents still only qualify for the $500 credit for other dependents (ODC) and that credit is not eligible for advance payments.
Watch out for Scams!
- You can only receive money by either filing a tax return with the IRS or registering on the IRS portals, exclusively on IRS.gov. Any other option is a SCAM.
- The IRS will never ask you for your personal information or threaten your benefits by phone call, email, text, or social media.
- The IRS won’t threaten you with jail or lawsuits, or demand tax payments on gift cards.
- If you receive an unsolicited email, text, or social media attempt that appears to be from the IRS, the Department of the Treasury Electronic Federal Tax Payment System, or similar,
- Do Not respond to the communication
- Notify the IRS at email@example.com.