UNDATED – Thousands of families throughout Indiana will start receiving their child tax credit payments in their bank account starting on July 15.
The Internal Revenue Service and the U.S. Department of the Treasury announced today that the first monthly payment of the expanded Child Tax Credit (CTC) from the American Rescue Plan will be made on July 15.
Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above, according to the IRS.
The credit impacts about 39 million households — covering 88 percent of children in the country — are slated to begin receiving monthly payments without any further action required.
The expanded child tax credit available for the tax year 2021 is different from the old child tax credit in the following ways:
- Amount – the credit increased from $2,000 to $3,600 for children under age six and $3,000 for children under age 18
- Age Limits – children under age 18 now qualify
- Income Limits – phase-out MAGI limits for those married filing joint begin at $150,000 or $75,000 for other filing statuses; phases out $50 for each $1,000 of income exceeding the threshold
- Refund-ability – the credit is fully refundable
- Advance Payment – families will receive partial credits throughout the year before filing taxes
The IRS will use 2020 income information to determine which taxpayers will qualify for the 2021 expanded child tax credit. Eligible families can receive 50 percent of the child tax credit in installments beginning in July 2021 through December 2021. The remaining 50 percent of the credit can then be claimed when filing 2021 taxes. Families will also be able to forgo advance payments and wait until tax time to claim the full credit. The IRS plans to roll out a portal later this year where families will be able to opt-out of advance payments if desired.
Since the IRS bases the 2021 enhanced child tax credit on 2020 income information and advance payments are an option, what happens if your 2021 income exceeds the threshold? You will likely have to pay back any advance payments for which you were ineligible when you file your tax return, depending on your specific situation. If your income has changed in 2021, you will provide updated information to the IRS on the portal (once available). You will also indicate a filing status change or if the number of children has changed.
If you don’t qualify, it’s ok; the “old” child tax credit will likely still be available if you qualified in past years. If your income is close to the new threshold, consider making adjustments in order to lower MAGI and be eligible for the enhanced credit.