What You Need to Know About the Child Tax Credit
The IRS recently announced that they will soon begin disbursing payments for the new monthly child and dependent care tax credit payments. The American Rescue Plan Act of March 2021 allowed for the expansion of the credit. We are here to help you learn more by answering the questions you may have about the child tax credit.
Do I qualify for the monthly child tax credit payments?
The IRS determined eligibility for the child tax credit based on information provided in 2019 or 2020 tax returns. You can expect to receive the monthly child tax credit if you meet the following income thresholds and you have a qualifying child.
- Income Qualifications: You will qualify if your modified adjusted gross income is up to $75,000 for single filers, up to $112,500 for heads of household, or up to $150,000 for married filers as well as qualifying widows and widowers. You may qualify for a reduced child tax credit if your income exceeds those amounts. The credit phases out by $50 for every $1,000 earned for income thresholds over $200,000 for single filers and $400,000 for married filers.
- Child Qualifications: Your child must be 17 years of age or younger, and a U.S. citizen, national, or resident alien. Your child must have a valid Social Security number, must reside with you for at least half the year, and be related to you. You must provide at least half of their support, such as clothing, housing, food, utilities, and other costs. You must claim the child as a dependent on your tax return.
How much is the child tax credit?
Families with qualifying children under the age of 6 will receive $3,600 per child, which breaks down to a $300 monthly payment. Families with qualifying children aged 6-17 will receive $3,000 per child, or a $250 monthly payment.
When do child tax credit payments start?
The IRS will start to make monthly payments in July and will continue through the end of the year. The first monthly child tax credit payment will go out on July 15.
When will payments arrive?
Here is the schedule of monthly child tax credit payment dates:
- Thursday, July 15
- Friday, August 13
- Wednesday, September 15
- Friday, October 15
- Monday, November 15
- Wednesday, December 15
Do I have to sign up for the child tax credit payments?
As long as you and your child meet the above qualifications, you will not need to take any action to receive the child tax credit payments. If you do not typically file taxes, the IRS has a non-filer sign-up tool. Families who qualify do not need to use this tool to sign up, as the payments will be disbursed automatically.
Do I have to accept monthly payments?
You are able to opt out of receiving the monthly child tax credit payments. You can instead receive the payment in one lump sum (the full $3,000 or $3,600 per child, depending which amount you qualify to receive) in the spring of 2022. The IRS will have an online portal set up by July 1 in which taxpayers can opt out of the monthly payments.
Is it better to take the monthly payment or the lump sum?
This depends on your individual financial situation. Parents with a lower income who may be struggling could use the monthly payments to help pay for food, diapers, clothing, child care, or other needs. Parents who may not need the money immediately or anticipate having to pay taxes in the spring of 2022 could opt-out of the monthly payment and instead have the full amount available at tax time to use for payments.
Will I qualify for the child tax credit if I had a child this year?
Yes. The IRS online portal launching July 1 will include the ability to report having added a child in 2021.
Can I get the credit if I don’t normally file income taxes?
Yes. The IRS updated the non-filer sign-up tool that was used for COVID-19 economic impact payments so that U.S. residents who don’t typically have to file a tax return, such as those with lower incomes, can sign up to receive the child tax credit.
Is anyone else besides the IRS offering the child tax credit?
No. Any other option claiming to be distributing the same or similar payments is a scam. The only way to receive the monthly child tax credit payment is by filing your tax return or using the IRS non-filer tool.
Please refer to the IRS website for additional information about the child and dependent care tax credit payments.