Similar to the Recovery Rebate Credit (Stimulus), the IRS will be advancing families with children and/or dependents the Child Tax Credit. The advance will be in equal monthly installments beginning in July. Instead of claiming that entire credit as in the past on your tax return (which reduces your taxes), you will receive monthly advances. Keep track of what you receive because it will be applied against the credit when filing your 2021 return.
The IRS will soon have a portal on their website – IRS.gov – which allows you to make changes should you change bank accounts.
What is the Child Tax Credit?
Child Tax Credit – was adjusted by the 2021 American Recovery Act in March.
- Eligible parents or caregivers will receive a $3,600 tax credit for each child ages 5 and under, with a $3,000 credit for kids ages 6 to 17 for the 2021 tax year. This is up from $2,000 for each child under age 17.
- The new plan increases the amount and the age limit of eligible children, and also waives the $2,500 earning requirement for parents or caregivers, so that those not employed can still benefit.
- Eligible parents and those with dependent children can now get an advance on half of their 2021 credit in the form of monthly payments of either $250 or $300 per child.
- Tax credits are an amount that taxpayers can subtract directly from any taxes owed.
- Those now eligible for the expanded tax credit include single-filers making up to $75,000 annually, heads of household making $112,500 annually and married couples filing jointly who make $150,000 annually.
- After that income cutoff, the expanded credit begins to phase out in increments as income increases. Those making up to $200,000 remain eligible for the original $2,000 credit.
As with the stimulus and the unemployment adjustments, the IRS will handle it. Any questions about the time table should go to the IRS. This office can not assist you with this matter as we have no control over the distribution.