08 Jul 2021 Changes to the Child Tax Credit
Parents, beginning July 15th you may be eligible to receive a new monthly payment for each of your dependent children aged 17 and younger as part of the American Rescue Plan. These payments are an advanced child tax credit and are connected to your personal income taxes. Eligible parents may receive half of their annual tax credit in the form of monthly payments, and then will receive the remaining half when they file their 2021 income tax returns.
Monthly Child Tax Credit
Parents with children under the age of 6 are eligible for up to $3,600 per child, or $300 per month. Parents with children from ages 6-17 are eligible for up to $3,000 per child, or $250 a month. These advanced monthly payments are scheduled to expire in December of this year.
Child tax credits have been available for a few decades now, but parents were only able to claim the credit when filing their taxes. Another change this year is the tax credit amount has increased from $2,000 for all children to either $3,600 or $3,000, depending on the child’s age. The government hopes that these monthly payments will help to offset a portion of childcare costs that families will experience throughout the year, and by receiving the payments monthly, families will benefit from the assistance as these costs are incurred.
To be eligible for the full tax credit, parents must make less than $75,000 if filing their taxes alone, or less than $150,000 if filing jointly, and less than $112,500 for “head of household” filers, such as single parents. If parents make more than those amounts, the credit is reduced to a lower amount. Additional qualifications include that you must reside in the United States for at least six months of the year, and the child must live with the parent claiming the child as a dependent for at least half of the year. Last, to receive the credit, your child must not turn 18 before January 1, 2022. Also, if you have a baby anytime in 2021, you will be eligible for the credit for your new child.
How to Receive the Credit
You will automatically receive these credits if you have previously set up direct deposit with the IRS. If you are not signed up for direct deposit, then you will receive a check in the mail. If you would like to receive your credit via direct deposit and not a check, visit the IRS Child Tax Credit Update Portal. You may also opt-out of the monthly child tax credit on that website.
Keep Good Records
It is important that you track the amount you receive each month, so you and your tax preparer know how much to claim as already received, you can then determine the credit (if any) that you are still eligible for when you file your 2021 taxes.
For more Information
The IRS has created a Frequently Asked Questions page about this in which you can visit for more detailed information. Kmetz, Elwell, Graham & Associates CPA is available to answer specific questions about how this will impact you and your income taxes. Call our Vero Beach, Florida office to schedule a consultation at 772-231-6902 or complete our online contact form.
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Messina is the Firm Administrator at Kmetz, Elwell, Graham and Associates and a blog contributor in the accounting and HR industries.child tax credit, taxes