On July 15, the first payments for the enhanced child tax credit will start going out to 39 million families with about 65 million kids, as reported by the IRS. Many people are still confused about the child tax credit that has been talked about for months now.
What is the new child tax credit?
The enhanced tax credit was part of the American Rescue Plan which was signed by President Joe Biden in March. The Maximum credit for 2021 is $3,600 for children under age 6 and $3,000 for children between 6 and 17. Half of the credit will be made in 6 monthly payments starting July 15, the other half can be claimed on your 2021 tax return. For those getting the full credit, payments are $300 per month for children under age 6 and $250 for those between the ages of 6 and 17. There is no limit on the number of children per household who can receive the credit.
Who qualifies for the maximum credit?
Most families will be eligible for at least part of the credit. The full tax credit is available to couples that are married filing joint tax returns with children and have an adjusted gross income of $150,000 or less, or individuals with children making $75,000 or less. Taxpayers making more will receive a credit that will phase out for couples at $170,000 and $95,000 for individuals. For taxpayers above the cap, you will still receive the regular child tax credit as in prior years.
How do I claim the tax credit?
If you filed a 2020 tax return the IRS will deposit the monthly credit automatically where you received your tax refund and stimulus checks. You can use the IRS eligibility tool to check and see if you are entitled to the credit. The payments will go out on the 15th of every month from July to December of 2021. There are talks of the monthly credit being extended beyond December but that will ultimately be up to lawmakers.
Can I opt outof the credit?
You can opt out of monthly payments through the IRS’s Update Portal. If you opt-out but still qualify you will receive the full credit when you file your 2021 tax return. You may want to opt out if you plan on making more money and will no longer be eligible later in the year. If your eligibility changes during the year you will owe the money back to the IRS which may cause problems for uninformed taxpayers.