New Child Tax Credit Advance Payments to Begin July 15

New Child Tax Credit Advance Payments to Begin July 15

| June 08, 2021
Share |

As part of the $1.9 trillion American Rescue Plan, taxpayers with children ages 6 to 17 could receive a child tax credit of up to $3,000, and those with children under 6, up to $3,600 for tax year 2021. The IRS is paying out 50% of these credits to qualifying families in advance starting July 15. The benefit is worth up to $300 per month for each qualifying dependent child under 6 and up to $250 for each child between the ages of 6 and 17.

The IRS has scheduled the first payment for July 15, and subsequent payments on the 15th of each month through the end of the year. Keep in mind, it is not the 2021 tax season yet, so these are “advanced” estimated payments based on a taxpayer’s 2020 tax returns (or 2019 returns if they have not filed 2020 yet). Since these payments represent half of the credit (from July through December) eligible taxpayers will receive the remaining payments (from January through June 2021) when they file their tax return in 2022. Since the payments are based on previous years tax returns, overpayments or underpayments based on 2021 income will be corrected when they file their 2021 return next year.

The new enhanced benefits are income-based and start to phase out at $150,000 for couples married filing jointly ($75,000 for individuals). The credit would then be reduced by $50 for every additional $1,000 of adjusted gross income earned, thus being phased out completely for those making $170,000 married filing jointly ($95,000 for individuals). 

Families that are ineligible for the new $3,000 credit because of higher adjusted gross incomes would still be able to claim the $2,000 per child credit, which is available to those making up to $400,000 for married couples filling jointly or for individuals making up to $200,000. 

Currently, the enhanced tax credit expires after December 2021, but President Biden is seeking to extend it for four more years.

Most taxpayers do not need to take any action.The CTC payments will be direct deposited into taxpayer bank accounts, sent as a prepaid debit card, or mailed as a paper check, depending on what information the IRS has on file for each taxpayer. 

For additional information visit https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

Share |