6 Things You May Not Know About The Child Tax Credit 

6 Things You May Not Know About The Child Tax Credit

Jul 12, 2021

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Some 36 million American families have received letters from the Internal Revenue Service (IRS) notifying them they are eligible for monthly payments of up to $300 per child by expanding an existing tax credit.

These payments, approved as part of the American Rescue Plan, allows families to receive a $3,000 annual benefit ($250 each month) for each child aged 6-17 and $3,600 (or $300 a month) for each child under age 6 for the 2021 tax year. 

What You May Not Know

  1. The payments received in 2021 will reduce the available tax credit that can be claimed when filing your tax returns for 2022. For example, if you are eligible for a $3,600 tax credit and receive $1,800 in payments in 2021, you may claim the remaining $1,800 when filing your 2021 tax return in 2022.
  2. Eighteen-year-olds and full-time college students 24 and younger will qualify for a one-time $500 payment.
  3. Parents with no income, or little income, are still eligible for the payments. 
  4. Families who don't typically file a tax return can register with a new online tool from the IRS to ensure they get their checks in the months to come.
  5. Participation is automatic, and individuals must opt out if they do not wish to receive the payments. Parents may want to opt out if:
    • Your eligibility will change during the year, like if you receive a raise. For example, then it could be better to wait and claim the full amount when you file your tax return.
    • Another family member (such as an ex-spouse) qualifies to claim your child as a dependent.
    • You reside outside the United States.
    • You don't opt out of this advanced credit, and your eligibility changes; you may end up having a balance due when you file your 2021 tax return. 

If you want to opt out of the monthly payments and claim your full amount when you file your tax return, you can unenroll on the child tax credit update portal.  View the deadlines to opt out from the monthly Child Tax Credit payment.

How Do You Qualify For These Payments

Qualification is based on the 2020 tax return filed by individuals or families. The expanded Child Tax Credit is available for single people with an adjusted gross income of up to $75,000 a year or couples with AGI of up to $150,000. The credit is reduced by $50 for every additional $1,000 of adjusted gross income earned from those thresholds. The credit provided to those with a child ages 6 to 17 will phase out entirely for individuals earning $95,000 and those making $170,000 and filing jointly. Note that the other general rules for child tax credit eligibility continue to apply. For instance, the child still must be a U.S. citizen, national or resident alien, and have a Social Security number. 

Parents don't need to be employed or otherwise have earnings to claim the child's credit for 2021. Prior rules limited the credit to families having at least $2,500 of earned income. For 2021, families with no earned income can take the child's credit if they meet all the other rules.

Participation is automatic, and individuals must opt out if they do not wish to receive the payments.

When Will The Payments Be Received

The IRS will make six monthly child tax credit payments to eligible families from July to December 2021. The first round of payments will arrive on July 15. After that, payments will be issued on August 13, September 15, October 15, November 15, and December 15.

Most payments will be directly deposited into bank accounts. To stop these advance payments, you must unenroll three (3) days before the first Thursday of next month by 11:59 p.m. Eastern Time. You do not need to unenroll each month. View the deadlines for unenrollment. Families for which the IRS does not have bank account information could receive paper checks or debit cards in the mail. Most eligible families do not have to do anything to get these payments.

For answers to other frequently asked questions about the Child Tax Credit payments that will be starting this week visit the IRS's website.

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