Starting July 15th, eligible taxpayers will begin receiving advance payments of their estimated 2021 child tax credit. The IRS will pay half the estimated credit in the form of advance monthly payments beginning July 15th and ending December 15th. Taxpayers will then claim the other half when they file their 2021 income tax return.
The monthly advance of the child tax credit is a significant change from prior years. The credit is normally part of a taxpayer’s income tax return and would reduce their tax liability. The choice to have the child tax credit advanced will affect the refund or amount due when the tax return is filed.
Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments. Using the IRS’s child tax credit and update portal, taxpayers can update their information to reflect any new information that might impact their child tax credit amount, such as filing status or the number of children. Parents may also use the online portal to elect out of the advance payments or check on the status of payments.
Qualifications and how much to expect
The child tax credit and advance payments are based on several factors, including the age of your children and your income.
- The credit for children ages five and younger is up to $3,600 – with up to $300 received in monthly payments.
- The credit for children ages six to 17 is up to $3,000 – with up to $250 received in monthly payments.
To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must have:
- Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer portal
- A main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
- Income less than certain limits
You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers. The credit begins to phase out above those thresholds. Married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income will generally get the same credit as prior law ($2,000 per qualifying child) but may also choose to receive advance monthly payments.
We are here to help you.
We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have a significant impact on your cash flow and financial plans.
Please contact your Whitinger advisor to discuss your specific situation. Planning ahead can help you maximize your family’s financial situation and position you for greater success.