How the Advance Child Tax Credit Can Help Your Family
The American Rescue Plan Act of 2021, signed into law on March 11, 2021, included nearly $1.9 trillion in pandemic relief funding and tax credits for businesses, individuals and families to help those in need and stimulate the national economy. As a result of one of the initiatives in the Act, millions of Americans received direct payments of up to $1,400.
Now, eligible families will receive even more financial help as part of the American Rescue Plan Act. The widely expanded Child Tax Credit program, which is projected to keep 5 million children out of poverty this year, will begin issuing direct monthly payments to eligible households. Read our guide to learn about recent changes to the program, and where you can go to see if you qualify.
What is the Child Tax Credit?
Recently, the American Rescue Plan expanded the Child Tax Credit program for 2021 in order to provide direct monthly payments to qualified low- to middle-income households with children up to age 17. New changes to the program allow families to collect six monthly payments for half the full benefit amount, instead of receiving the credit the following year when most recipients file taxes. Because the program aims to reduce childhood poverty in families that need it most, the credit is phased out for tax filers earning above certain income thresholds.
How Do I Qualify for the Advance Child Tax Credit Payments?
In order to qualify for the Child Tax Credit, you must either:
- File a 2019 or 2020 federal income tax return, or
- Use the non-tax filer tool located on the IRS.gov website
If you signed up to receive the economic stimulus payment, you do not need to use the non-tax filer tool to sign up for the Child Tax Credit program. The IRS will automatically enroll qualified households for the Child Tax Credit based on information provided in the most recent tax return, or through the non-tax filer tool. Eligible recipients should also receive detailed information through the mail regarding upcoming scheduled payments, based on modified adjusted gross income (AGI) information provided on the most recent tax return.
The maximum benefit is available for taxpayers with an AGI up to the following:
$150,000 for married couples filing a joint tax return or qualified widow/widower
$112,500 for heads of household
$75,000 if filing as an individual, single tax filer or married person filing separately
Child Tax Credit benefits may still be available for those earning an AGI close to the appropriate income limit listed above. Payments are reduced $50 for every $1,000 in modified AGI above the listed income thresholds. If you’re unsure, you can use this tool to check your eligibility for the Child Tax Credit or calculate your payments.
How Much Will My Family Receive From the Child Tax Credit?
In 2021, the maximum child tax credit increased to $3,600 per child under 6 and to $3,000 per child ages 6 to 17. Previously, the tax credit maxed out at $2,000 per qualified child.
Monthly payments are issued for half the total benefit amount starting in July 2021, which amount to $300 a month per child under 6, and $250 a month per child ages 6 to 17. The rest of the credit is to be claimed with the appropriate tax return the following year.
How Are the Child Tax Credit Payments Sent?
Due to recent changes, Advance Child Tax Credit payments are issued monthly for half of the total credit amount. Payments begin in July 2021 and finish after six months in December 2021. Previous to the advance payment program, qualified households claimed the Child Tax Credit when they filed taxes.
If you need to manage Child Tax Credit payments or update your bank account information, head to the IRS website.
What Should I Do If I No Longer Qualify for the Program?
Because the IRS used information from the most recent tax return, your income may have changed and your household may no longer qualify for the Child Tax Credit program. For example, this may be true for someone who earned less money during the pandemic, but had switched to a better job when the economy improved. If your income excludes you from claiming the Child Tax Credit, use this portal to opt out of the program.