The expanded 2021 child tax credit could help your family finances
If you have a young child in your household, you have likely received a letter from the white house indicating that you may be eligible for the expanded 2021 child tax credit. When the American Rescue Plan passed in March of 2021, most families took note of the $1,400 stimulus check per person this year, but fewer talked about the provision that expanded the refundable child tax credit for 2021. In addition to expanding availability and size of the child tax credit, a portion of that credit will be paid out to families in 2021 rather than in 2022 when taxes are filed.
How much? The maximum credit amount has increased to $3,000 per qualifying child between ages 6 and 17 and $3,600 per qualifying child under age 6. Starting July 15, households getting the full benefit will begin receiving $300 per month for children under the age of 6, and $250 for those between the ages of 6 and 17.
Who is eligible? Americans under $150,000 of income who file married filing jointly (MFJ) or $75,000 for those filing single will receive the full credit. After those income levels the credit will phase out until completely disappearing for Single filers earning $95,000 and MFJ filers earning $170,000.
For those taxpayers who make more than the enhanced credit limits, the regular child tax credit of $2,000 per child under 17 will still be available for individuals making less than $200,000 annually, or those making less than $400,000 a year as a married couple.
How do you get your payments? If you filed a tax return in 2020 or 2019 and included your direct deposit information, you don’t have to do anything. The IRS will use your previous years returns to establish your eligibility and collect your direct deposit information.
The American Rescue Plan also opened the child tax credit up to those individuals who are not working, a group of people who previously were not eligible for the credit. For those families, the IRS launched the Child Tax Credit Non-filer Sign-up Tool on June 14 to sign up for the new credit.
For those who may have had a change in circumstance over the past year, or who need to change where their benefit is being sent, the IRS will open another online tool later in June to allow taxpayers to check eligibility and manage and unenroll from payments. For those taxpayers who do not include direct deposit information on their return or elect not to give their direct deposit information via the portal, paper checks will be sent out in the mail.
If families prefer to receive the credit as one lump sum on their tax return at the end of the year, they can opt out of the monthly payments using this same online portal.
From July on, monthly payments will continue to be make on the 15th of each month through the end of the year, with the remainder of the credit that was not received monthly being included on parents’ 2021 tax return in 2022. At this time, the enhanced tax credit only runs through 2021, but proposals have been made to extend the change or make it permanent.