What do the new advance child tax credit payments mean? Here’s everything you need to know.
What is changing?
The American Rescue Plan Act (ARPA) that was signed in March of 2021 expands the Child Tax Credit (CTC) for the 2021 tax year. It increased the CTC from $2,000 per qualifying child in previous years to $3,600 per qualifying child under age 6 and $3,000 per qualifying child between ages 6 and 17 by the end of 2021.
Who is eligible?
Approximately 88% of children in the U.S or 39 million households will receive the credit.
Those eligible for the full credit include married couples filing jointly making up to $150,000, single parent head of household filers making up to $112,500, and individuals making up to $75,000.
Taxpayers earning above these thresholds are still eligible for the regular child tax credit of $2,000 per child under age 17, subject to a limit of modified adjusted gross income of less than $200,000 annually, or $400,000 for married couples.
How do I receive the payments?
Payments will be made in monthly installments. Those eligible for the full credit will receive $300 per month for children under age 6 and $250 per month for children between ages 6 and 17.
The IRS will automatically determine eligibility based on 2020 filed returns, or 2019 returns if 2020 has not yet been filed, and notify taxpayers. The majority of those eligible will receive payments by direct deposit, though the IRS will be sending paper checks to those without direct deposit information on their tax returns.
When will this happen?
The key date to remember is July 15, which is when the first monthly payment should be received. Future payments will be made on or around the 15th of every month. The advance payments will cease at the end of 2021, or December 15th. The remaining credit will be received in 2022, once families have filed their 2021 taxes.
File your 2020 tax return.
CKH and our team of experts are here to help. Have any questions or want to book a free tax planning consultation? Contact us today.