The IRS on Monday announced that monthly child tax credit advance payments will go out starting this summer to eligible parents. The installments are part of the American Rescue Plan COVID relief bill signed in March.
This child tax credit is not new. Eligible parents already receive $2,000 from the government for each qualifying child when they get their tax refund in the spring. The change here is that the amount has increased and there will be the ability to receive up to half of the money in the form of monthly payments in the second half of this year. The monthly payments will be an advance on the money parents would get when they file their taxes in 2022.
Who is eligible for the child tax credit?
About 39 million households will be eligible for the monthly child tax credit, which the IRS says covers about 88% of children in the U.S.
Married taxpayers who made less than $150,000 in 2020 and who filed jointly will receive the full amount, as will qualifying widows and widowers. The full amount will also go to heads of household who made up to $112,500 and individuals who made up to $75,000. The amount will be phased out after that.
How much is the child tax credit?
It's $3,600 for each child under age 6. That breaks down to $300 per month. For children ages 6-17, it's $3,000 or $250 per month. Children who turn 17 in 2021 are among those who qualify.
When do child tax credit payments start?
July 15 is when the monthly payments begin. They will continue through December.
Because this is starting in the middle of the year, only half the money will come via monthly payments. The rest will come after taxes as part of the refund next spring, or will be deducted if the taxpayer owes the IRS.
When will the monthly child tax credit payment arrive?
The IRS says the payments will be made on the 15th of each month unless it falls on a weekend or holiday. Payments will arrive either by direct deposit or in the mail as a paper check or debit card.
Do I have to take the monthly child tax credit payment?
No. The IRS says it will have an online portal set up where taxpayers can opt-out of the monthly payment and take it all in one lump sum in the spring of 2021.
Is it better to take the monthly child tax credit or the lump sum?
It depends on your financial situation. One reason there was a push for the monthly payment was to help cut childhood poverty. Parents who have a lower income and are struggling could use the money immediately on food, diapers, clothing, child care or whatever is needed at the moment.
If you're someone who doesn't need the money immediately, or who anticipates possibly having to pay the IRS in the spring, you could opt-out and know that the full amount will be available at tax time.
Do I get the child tax credit advance if I had a child this year?
The IRS says the online portal will include the ability to report having added a child in 2021. It will also allow taxpayers to update their income and filing status.
Will the monthly child tax credit continue in 2022?
The increased and monthly child tax credit from the American Rescue Plan is only good for 2021 and is not set to continue in 2022. But in President Joe Biden's American Families Plan, he is proposing extending it to 2025. Some members of Congress have called to make it permanent.