Child tax credit payments started hitting the bank accounts of eligible parents today. If you aren't sure if you should be receiving a check, or if you have no idea what we're talking about — don't worry. We'll break it all down.
What is the child tax credit?🧾
It's basically a credit providing certain parents with dependent children extra funds each month through the end of the year as well as a tax break next year.
It's not a new concept, but there are some changes this time around. The Biden administration increased the size of the credit as part of the American Rescue plan — aka the $1.9 trillion coronavirus relief package.
Now, instead of receiving $2,000 from the government for each dependent child, parents will receive $3,000-$3,600 for each child. And parents can now receive up to half of the money, in advance, in the form of monthly payments instead of waiting for it in their tax returns. They will claim the other half when they file their 2021 taxes next year.
How much is the credit?💸
For each child under age 6 it is $3,600. That breaks down to $300 per month. For children ages 6-17, it is $3,000, or a breakdown of $250 per month. Children who turn 17 in 2021 are among those who qualify.
Who is eligible?👪
About 39 million households will be eligible for the monthly child tax credit. According to the IRS about 88% of children in the U.S. are covered by it.
Married taxpayers who made less than $150,000 in 2020 and who filed jointly will receive the full amount. So will qualifying widows and widowers. The full amount will also go to heads of households who made up to $112,500 and individuals who made up to $75,000. The amount will be phased out after that.
How can you apply?💻
If you filed taxes and the IRS already has your bank account information, then you're good to go. The payments should be deposited directly into your account on the 15th of each month.
But even if you haven't filed taxes in 2019 or 2020, you might still be eligible for the credit. Learn more and apply at the IRS Child Tax Credit Non-filer Sign-up Tool.
How do you opt-out of the child tax credit payments?🚫
You can opt out through the IRS Child Tax Credit Update Portal. This is also where you can check the status of your payments and update your bank information for direct deposit.
The push for the monthly payments was to provide relief for struggling parents who could use the money immediately on food, diapers, clothing, child care or whatever is needed.
Those who do not need the money right away can opt out and receive the full amount when they file their taxes.
Another 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 it back after filing a tax return.
Will the monthly child tax credit continue in 2022?🤷
As of now, the increased and monthly child tax credit from the American Rescue Plan is only good for 2021 and is not set to continue next year. But in President Joe Biden's American Families Plan, he is proposing extending it to 2025. Some members of Congress have pushed to make it permanent.
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