Many of you may have noticed a little extra money in your checking account last week due to the Advance Child Tax Credit Payments from the IRS. Curious to know more, I did some research and wanted to share my findings.
Why am I receiving these payments?
The expanded Child Tax Credit was authorized by the American Rescue Plan Act, enacted in March 2021. This Act raised the maximum Child Tax Credit in 2021 to $3,600 for qualifying children under the age of 6 and to $3,000 per child for qualifying children between 6 and 17. Before 2021, the credit was worth up to $2,000 per eligible child and 17 year olds were not considered as qualifying children for the credit.
Do I qualify?
The maximum credit is available to taxpayers with a modified adjusted gross income (AGI) of:
- $75,000 or less for singles,
- $112,500 or less for heads of household, and
- $150,000 or less for married couples filing a joint return and qualified widows and widowers.
Please use the following table as a guide to estimate your 2021 Child Tax Credit:
How much is it?
The payment will be up to $300 per month for each qualifying child under age 6 and up to $250 per month for each qualifying child ages 6 to 17. The IRS will issue advance Child Tax Credit payments on July 15, August 13, September 15, October 15, November 15 and December 15.
Are advance Child Tax Credit payments taxable?
No. These payments are not income and will not be reported as income on your 2021 tax return. The payments are advance payments of your tax year 2021 Child Tax Credit. The IRS will pay half the total credit amount in advance monthly payments beginning July 15. You will claim the other half when you file your 2021 income tax return. This means that you will receive less than you typically receive next April when you file your tax return. If the IRS has incorrectly calculated this advanced payment, you may end up owing the money back to them. These changes apply to tax year 2021 only.
What if I do not want to receive advance Child Tax Credits? If you prefer not to receive monthly advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you know you will not be eligible for the Child Tax Credit for your 2021 tax year, you can un-enroll through the Child Tax Credit Update Portal (CTC UP).
As always, if you want to set up a time to discuss any financial opportunities or concerns, don’t hesitate to call or email me. You can also schedule a phone call or meeting by clicking here. For more information about the Advanced Child Tax Credit, click here to visit the IRS website.