Child Tax Credit
The American Rescue Plan, which I was proud to support, expanded the Child Tax Credit to provide up to $3,600 for children under the age of 6 and $3,000 for children under the age of 18. The American Rescue Plan also provides families with the option to receive the tax credit monthly.
The payments are set to be distributed starting July 15th. Your family could receive up to $300 per month for children under the age of six and $250 for older children.
The vast majority of families should begin receiving the monthly payments automatically, with no further action required. If your family did not file a tax return for 2019 or 2020 and did not use the IRS non-filer tool last year to register for the stimulus checks, then you should go online and use the IRS Tool for Non-Filers to sign up for monthly child tax credit payments. In order to ensure you receive the proper amount as soon as possible, you will soon be able to use to the Child Tax Credit Update Portal to update information such as income, number of children, and marital status.
If you do not wish to receive the advance monthly payments, you may opt-out through the Child Tax Credit Update Portal to instead receive the full amount of the credit when you file your 2021 taxes.
Frequently Asked Questions
- Families will qualify for a full credit if their income is below $75,000 for single filers, $112,000 for people filing as head of household, or $150,000 for people who are married and filing jointly. The payments phase out gradually for higher incomes and entirely for single taxpayers earning $95,000 and for joint filers earning $170,000. However, those with higher incomes are still eligible for the regular $2,000 Child Tax Credit, which phases out for single filers earning $240,000 and joint filers earning $440,000.
When is age determined for eligibility? What if my child turns 18 this year?
- Age is determined on December 31, 2021. If your child turns 18 this year, then they are not eligible for the monthly Child Tax Credit. However, the American Rescue Plan did provide for a one-time credit of $500 for dependent children aged 18 and for dependent full-time college students aged between 19 and 24.
Can I still qualify if my child is born or adopted this year?
- Yes. A child’s eligibility is based on their age on December 31, 2021. For any dependent child who is born or adopted in 2021 or who was not claimed on your 2020 return, you are eligible to receive a Child Tax Credit.
- If you would like to receive an advance payment, then you must report that you have a new dependent to the IRS after they are born or adopted. You can make this report through the IRS’s Online Child Tax Credit portal once it begins accepting those updates later in the summer.
- Alternatively, you can wait to claim them when you file your 2021 tax return as in previous years. Waiting until you file will mean you receive the correct amount of the Child Tax Credit as a lump sum or as a credit against any taxes you may owe.
Can I opt out of the monthly payments?
- Yes, if you prefer to receive the Child Tax Credit as a lump sum or as a credit against what you owe (like the Earned Income Tax Credit), then you may opt out of the monthly advance payments. Everyone who does not opt out, will automatically receive the payments as an advance. Either way, you receive the same size credit.
Is it better to take the monthly child tax credit or the lump sum?
- Either way the credit will be the same size so it depends on your financial situation and personal preference.
- One reason we pushed for monthly payments was to help cut childhood poverty. Parents who have a lower income or who are struggling financially could use the money immediately on food, diapers, clothing, child care or whatever is needed. The amount is the same whether you receive it as a monthly payment or as a lump sum.
- For those who do not need the money immediately, or who anticipate possibly having to pay taxes next year, they are able to opt-out and know that the full amount will be available at tax time.
- One reason to consider opting out is if your income increases this year to a level where you no longer qualify for the credit. If that happens, but you have taken the advance payment, you may then be required to pay some or all of it back after filing a tax return.
Will non-custodial parents receive a credit?
- Unless you and your spouse file jointly, a child can only be claimed as a dependent by one parent. Generally, the custodial parent claims the credit, but the one exception that would allow a non-custodial parent to claim their child as a dependent is if the custodial parent agrees not to on their own tax return. The non-custodial parent must obtain a signed IRS Form 8332 or similar written document from the custodial parent allowing them to claim a child. Parents who have joint custody may also use this form to alternate the tax years in which each can claim the dependent.
How do people get their payments?
- Nearly all hardworking families should get their monthly payments automatically beginning July 15th with no further action required. If you’ve filed tax returns for 2019 or 2020, or if you signed up to receive a stimulus check from the Internal Revenue Service, you will get this tax relief automatically. You do not need to sign up or take any action.
- Families who did not file a tax return for 2019 or 2020 and who did not use the IRS Non-filers tool last year to sign up for the Economic Impact Payments, should go online and use the IRS Child Tax Credit Non-filer Sign-up Tool to sign up today.
- Families who got their refunds from the IRS through direct deposit will get these payments in their bank account around the 15th of every month until the end of 2021. People who don’t use direct deposit will receive their payment by mail around the same time.
- Families will be able to determine their eligibility, check the status of their payments, and more at IRS.gov/childtaxcredit2021 later this month.
Do people get this credit even if they don’t have income to report and therefore aren’t working?
- Yes, low-income families can receive the full Child Tax Credit, even if they have no earned income.
Will getting the Child Tax Credit hurt eligibility for other programs?
- No. The Child Tax Credit does not count as income, so it will not be counted when determining if you or anyone else is eligible for SNAP/Food Stamps, Medicaid, TANF Cash Assistance, SSI, or other federal public benefits or state or local programs funded by federal funds.
Will people pay taxes on the Child Tax Credit or have to pay it back?
- No. The Child Tax Credit is not income. It is a tax credit that reduces the taxes you owe, which you automatically receive ahead of time. You will have to report it on your tax returns. The IRS will send a letter in January 2022 with the total amount of money you received in 2021, which can be used when you file taxes next year.
- It is possible you would have to pay some of the advance payments back if you wind up getting more money than you ultimately qualify for. This could happen if your household income increases to the point that you no longer qualify for the same amount, if your dependent ages out of an age bracket during the year, or if there is a change in custody.
- To reduce the chances of an overpayment, you will be able to update the IRS later this summer about changes to your dependents, marital status, and income through the child tax credit portal. Updating the portal or any changes next year could also result in an additional payment next year if you were underpaid.
Is the expanded Child Tax Credit only for this year?
- The expansion we passed in the American Rescue Plan is for 2021. But Democrats are working hard to make sure this support for families continues. The American Families Plan would extend the expanded Child Tax Credit for years and years.