There is a lot of chatter right now surrounding the child tax credit payments, which began hitting the bank accounts on July 15 and will continue to do so on the 15th of each month through December. Thought I’d check in and offer some answers to common questions I’m hearing.
Here’s the tea
on it:
As part of the American Rescue Plan, the child tax credit will offer $3,600 per child under six years old and $3,000 per child between six and seventeen years of age for the 2021 tax year. These payments will be paid monthly to qualifying households by default, offering up to $250 for kids aged 6 to 17 or $300 per child under the age of 6 for qualifying families.
The monthly payments began on July 15 and will continue through the end of 2021, with the remainder of the credit set to be sent to recipients via tax refunds in 2022.
Do I qualify?
Several income and age requirements can apply depending on your situation, so we encourage you to use the IRS tools to verify your eligibility and credit amount.
That said, although there are several requirements, the credit is available for most parents who claim children 17 or younger as deductions on their taxes and who have a modified adjusted gross income of $150,000 (for married filing jointly status), $75,000 (for single filers, or $112,500 (for head of household filers). The tax credit is a refundable tax credit, meaning that if the credit is a higher amount than what you owe for 2021, you will receive a refund for the difference. This feature is similar to how the Earned Income Tax Credit works.
How is the money being distributed?
If you received a stimulus check or filed taxes in 2019 or 2020, you should receive the credit through direct deposit. If the IRS does not have your current banking information, you can expect to receive your payments via check in the mail. If you did not receive your first payment on July 15th, visit the Child Tax Credit Update Portal to see if you need to update your information.
What about those who don't file taxes?
If you weren't required to file taxes in either 2019 or 2020, or you did not do so, you will need to update your information with the IRS in order to receive the money. Doing so is simple using this online tool created by the IRS for parents to register their information electronically. The IRS recommends using the tool on a computer rather than a mobile device for optimal functionality.
You can opt out!
The monthly payments are technically “advance monthly payments,” and you can opt out of them if you would like. Individuals and households who expect to have a tax liability for 2021 and would prefer not to cut an even bigger check during tax season in 2022 may want to consider this option. Let me know if this is something you’re considering or want to discuss--happy to help you weigh the options.
If you qualify, what’s your plan?
These advance monthly payments will help many American families that need it most. If you find yourself receiving the credit and do not need the additional money for expenses, investing it as part of your long-term plan could be a wise choice. While $250 or $300 monthly may not seem like very much, it’s important to remember the principles of compound interest and long-term investing. $3,000 could add up nicely over time!
Hope this has been helpful--as always, I’m here to help if you need anything or would like to catch up.