In June, more than 36 million eligible American families are expected to receive a letter in the mail from the Internal Revenue Service about monthly child tax credit payments slated to start on July 15.
Eligible families should begin receiving advance payments, says the IRS, either by direct deposit or check. The payment 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.
Child Tax Credit Changes
For one year, the American Rescue Plan has raised the maximum 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 worth 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.
Another big change
The entire child credit is fully refundable for 2021. That means eligible families can get it, even if they owe no federal income tax. Before this year, the refundable portion was limited to $1,400 per child.
When the payments go out
Mark your calendars. The other advance payments in 2021 can be expected on Aug. 13; Sept. 15; Oct. 15; Nov. 15; and Dec. 15, according to the IRS.
Plans call for a second IRS letter to be mailed soon that estimates how much money qualifying families should receive monthly from July through December 2021.
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.
*For Check Deposits
If you receive a check in the mail, try our Remote Mobile Deposit feature. Learn more here.
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
Soon, an online tool developed by the IRS will allow families to unenroll 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.
Online portal planned
This summer, the IRS says it’s making plans to add additional tools and online resources to help families navigate the advance child tax credit. And later this year, you should be able to visit IRS.gov and use a 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.
With Reporting by Casandra Andrews
Source: Jean Chatzky, with SavvyMoney
* Not part of original source.