Child Tax Credit Payments
Parents of children age 17 and under – this blog’s for you! Starting in July, you can expect to receive monthly payments from the IRS as a result of changes to the Child Tax Credit for 2021. Here’s what we know so far:
The Child Tax Credit looks markedly different than it has in years prior. What was once a partially refundable credit, capped at $2,000 per child under 17, has transformed to a fully refundable credit of up to $3,600 per child (under the age of 6) or $3,000 per child between ages of 6 and 17. What’s really setting this credit apart is that it is advancing half of the money to parents up-front via $250 - $300 monthly installments, starting on July 15th and wrapping up in December. That means you can expect to see anywhere between $1,500 and $1,800 per qualifying child by the end of 2021, with the remainder coming with your 2021 tax refund.
There are some stipulations in place, similar to the recent stimulus checks that many Americans received. Depending on your income, you may receive a lower amount – or no payments at all. Single earners making over $75,000 annually, head of household making over $112,500 annually, and married couples making over $150,000 annually, will all see their payments phase out by $50 for every $1,000 of income exceeding the threshold.
Other FAQs
I have a joint custody agreement, can we both claim the Child Tax Credit?
No. Only one parent can claim this credit.
Will this Child Tax Credit change continue into 2022 and beyond?
The short answer is maybe. The long answer is that while this credit is presented as a single-year increase, the Biden administration is backing an expansion through 2025. Congress will have to approve it, but there is a strong possibility that we could see this in future tax years.
What if I have a child who is between 18 and 24 and is a dependent, or dependents currently enrolled as full-time college students?
Parents of qualifying dependents between ages 18 – 24, as well as full-time college students, will receive a one-time $500 deposit.
I like having a lump-sum payment at the end of the year. Can I just opt out of monthly payments?
Absolutely! You are not obligated to receive the monthly deposits. The IRS will have a portal available to opt out if you want.
I’m expecting a baby or adopting a child this year. Will I still qualify for the Child Tax Credit and the monthly payments?
Yes! Remember to update the IRS on the status of any births or adoptions. Adopted children will need to be US citizens to qualify for the credit. You can update this information on the IRS portal when it is live in early July.
I am not required to file taxes. Will I still qualify for the credit?
Yes! You will need to update your information on the IRS portal so that you can receive your payments.
I didn’t file my 2020 taxes. Do I still qualify for the credit?
In order to receive payments, you need to have filed your 2020 taxes. If you missed the May 17th deadline for filing, you will still be eligible for the payments, but you may not get the money right away.
How will I receive my money?
You will receive your credit in the same way that you received your stimulus check or tax refund. For most people, it will arrive as a direct deposit, but the IRS will still be sending out paper checks and debit cards.
What if I end up owing taxes?
Just like any other tax year, you may end up paying Uncle Sam. If you are in doubt, contact your tax professional early enough to plan for a tax repayment.
Do you have more questions about the Child Tax Credit? Leave a comment below or email me.
Krista Kyte is a personal finance blogger and personal banker with over 18 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that will help consumers reach and maintain financial security, and start living the life they’ve always wanted.
