Expanded Child Tax Credits could put money in your account
If your household has children under the age of 18, be on the lookout for direct Child Tax Credit Payments from the Internal Revenue Service (IRS) starting July 15, 2021. With the tax credit amount increasing for this tax year, the federal government is distributing about half of the credit through direct regular payments this July through December.Most eligible taxpayers will notice the funds deposited in a bank account. The remaining balance will be applied when you file taxes in 2022 for the 2021 year.
As part of the American Rescue Plan Act (ARPA) of 2021, the tax credit increases apply to this tax year only, with payments intended to stimulate the pandemic-challenged economy. Families have expressed plans to use the funds to pay bills, save for their kids’ education, buy groceries and make other needed purchases.
What the expanded credit means:
- The 2021 Child Tax Credit increased from up to $2,000 per qualifying child to:
- up to $3,000 per qualifying child who is age 6-17 at the end of 2021
- up to $3,600 per qualifying child under age 6 at the end of 2021
- Taxpayers will receive up to half of the Child Tax Credit through advanced direct payments of:
- $250/month per qualifying child who is age 6-17 at the end of 2021
- $300/month per qualifying child under age 6 at the end of 2021
- Most eligible recipients (about 80 percent) will see the advanced payments deposited about the middle of each month into their bank account on file with the IRS; some will receive paper checks or debit cards.
- The IRS estimated recipients’ advanced payments using information in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns were not filed and processed before payments were calculated).
- The IRS will make payments regularly July through December to eligible taxpayers who have a main home in the United States for more than half the year.
- Taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any taxes.
- Taxpayers can opt out of advanced payments.
- The increased tax credit amounts are reduced/phased out for higher income tax filers, starting at $150,000 for married couples filing jointly and qualifying widows or widowers, $112,500 for heads of household and $75,000 for all other income taxpayers.
To learn more, visit the IRS website, which is updated as details become available.