On July 15, the IRS started sending the advance Child Tax Credit payments that the American Rescue Plan expanded to give more money to those who receive it. How much money can families get for 2021?
Millions of eligible families started receiving the money, as direct deposits began appearing in bank accounts on July 15 and checks arrive in mailboxes. How much money can families get for 2021?
The American Rescue Plan made important changes to the Child Tax Credit and the expanded credit means that:
• The credit amounts will increase for many taxpayers
• The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don't have earned income or don't owe any income taxes.
• The credit will include children who turn age 17 in 2021.
• Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.
Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year, but for the tax year 2021, families claiming the CTC for the tax year 2021 will receive up to $3,000 per qualifying child between the ages of 6 and 17 and will receive $3,600 per qualifying child under age 6 at the end of 2021.
According to the IRS website, the increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year, and the total of the advance payments will be up to 50 percent of the Child Tax Credit.
Advance payments will be estimated from information included in eligible taxpayers' 2020 tax returns or on their 2019 returns if the 2020 returns haven’t been filed and processed yet.
This is why the IRS keeps on urging people with children to file their 2020 tax returns as soon as possible to make sure they're eligible for the appropriate amount of the CTC as well as any other tax credits they're eligible for, including the Earned Income Tax Credit (EITC).
Once again the agency has reminded people that filing electronically with direct deposit is the best option for it can speed refunds and future advance CTC payments.
Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.
Eligible taxpayers who do not want to receive advance payments of the 2021 Child Tax Credit can decline to receive advance payments and also have the opportunity to update information about changes in their income, filing status, or the number of qualifying children on the Child Tax Credit Update Portal.