New Increase in Child Tax Credit Payments
As revealed by the Biden administration, around 39 million families will receive monthly child tax credit payments this year. The advance payments are going to start from July 15.
The IRS is sending out these payments with the hope to overcome issues related to child poverty. For the first time, payments that are done annually as tax refunds are now going to be distributed on a monthly basis.
Families will receive the second-half of their remaining payment as a tax refund.
You Will Learn
What Is the New Child Tax Credit for 2021?
The new child credit falls under a $1.9 trillion economic relief program by Biden’s administration. This relief program is known as the ‘American Rescue Plan (ARPA)’ which was introduced in March.
ARPA attempted to expand the child credit tax that conclusively means:
- There will be an increase in the credit amount for most of the taxpayers.
- The credit for qualified children is refundable.
- Children who turned 17 in 2021 can be qualified.
- Taxpayers may get some credit in 2021 before they file a 2021 tax return.
How Does the Monthly Child Tax Credit Work?
As stated repeatedly, the first payment is scheduled for July 15 followed by the subsequent payments on the 15th of every month until December 2021 (holidays are an exception). Hence, taxpayers will receive $1,500-$1,800 per qualified child until December 2021.
As this is not the 2021 tax filing season, hence, these payments will be done in advance. Being a taxpayer, your payment will be estimated, using your 2020’s tax returns as a foundation. You will get payments for January-June 2021 when you’ll file your returns in 2022.
If you are overpaid or underpaid in the current year, then the payments will be corrected when you’ll file your 2021’s return the next year.
The tax credits program is to expire after December 2021. However, American Families Plan calls for extending it for four years through 2025. Moreover, Democrats in Congress seek to make it permanent to benefit the American families.
It’s important to note that If you file your taxes, you won’t have to do anything to receive the payment! Your payment will either be deposited into your bank account or sent you as a prepaid debit card. It depends on the information the IRS has for you.
How Much Is the Monthly Child Tax Credit?
The plan offers $3000 to qualified child below age 6. The benefit is worth $250 per month for a qualified child of age between 6 and 17. The families will receive the payment per qualified child by December 2021.
Ultimately, the family will be paid a maximum $3,600 per child below age 6 and $3,000 per child of age between 6 and 17. Family fulfilling eligibility criterion having children of age 3 years, 6 years, and 17 years will get an extra $800 per month starting from July until December.
How to Claim Your Child Tax Credit Payments
If you are a qualified recipient there is not action you need to take other than filing your taxes and updating the IRS of any changes in income, marital status and family status to receive your TCT payments.
Some helpful advice to those that want to receive their payment as fast as possible:
The IRS advises that you file your 2020 taxes electronically. Also the sooner you file your taxes, the faster you will receive your CTC payments. File your taxes as soon as possible, electronically and via direct deposit. This will help the IRS pay any credit, taxes, stimulus and return with direct deposit which is fast than receiving payments via regular mail.
Who Qualifies for Monthly Child Tax Credit Payments?
As announced by IRS, up to 90% of the families having children qualified for the child tax credit, making it more than 65 million children in the U.S. To qualify for the monthly child payment, your adjusted gross income levels are analyzed. You’ll qualify if your adjusted gross income are below these levels:
- Heads of households: $112,500
- Individual tax-payers: $75,000
- Married taxpayers filing jointly: $150,000
- Widows and widowers: $150,000
Each dollar above these thresholds will automatically reduce your payment by 5 cents.
So now you know the answers to simple but fundamental questions regarding child tax credit. You can use the child tax credit calculator for this year and determine the expected benefit.
The results we shared are based on our current knowledge of law. IRS is to determine the final figures.
Have something to add regarding child tax credit? Let us know in the comments!