Changes to the Child Tax Credit Explained

The recent changes in the Child Tax Credit expansion included in The American Rescue Plan Act (ARPA) will help many families receive advance payments starting this summer. The Child Tax Credit expansion is only for the tax year 2021.

This is a tax cut. But you don’t have to wait until you file your taxes to receive it. You will get half of it during the last six months of this year and half of it when you file your taxes next year. Credit amounts will increase for many taxpayers. Some important provisions:

  • The qualifying children credit is fully refundable, meaning taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
  • The credit is inclusive of children who turn age 17 in 2021.
  • Taxpayers may receive partial credit in 2021 before filing their 2021 tax return.

Families that claim the Child Tax Credit will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of the 2021 calendar year and they will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the previous law, the amount of the Child Tax Credit was lower at $2,000 per qualifying child and included only children that were under the age of 17 at the end of the year.

The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.

Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have their main residence in the United States for more than half the year. The total of the advance payments will be up to half of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet). The extra money will be delivered on the 15th of the month from July through December. In August, the payment may arrive on the 16th because the 15th is a Sunday.

The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the Child Tax Credit as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit (EITC). Electronic filing through direct deposit will speed refund payments and advance Child Tax Credit payments in the future.

Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.

Taxpayers who are eligible for this benefit but do not want to receive advance payment of the 2021 Child Tax Credit can decline receiving advance payments through this portal. Taxpayers can also use this portal to update information about changes in their income, filing status or the number of qualifying children. Refer to this page for frequently asked questions.

Please contact your Whitlock advisor if you have questions or want additional information.


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