Additional Child Tax Credit Advance

child tax credit taxes May 22, 2021

Kids. They are cutest sweetest little things. And also, really expensive.

In March 2021 a new stimulus bill was passed. Part of that bill included the Additional Child Tax Credit Advance. Before we talk about the advance, we should talk about the regular child tax credit. The child tax credit has taken on many different forms, but most recently it's been a $2,000 payment per child up to 3 children. Part of the pandemic relief includes changing the amount of child tax credit. In 2021, instead of $2,000 per child, families can receive up to $3,600 for children under 6 and $3,000 for children from 6 to 17 years old. 

Normally the child tax credit is a big windfall on the tax return. For 2021, Congress is trying something different. Instead of having to wait until 2022 to claim the entire amount on your tax return, they are going to make partial payments during 2021.

When Will the Payments Be Made?

Payments will be made monthly between July and December 2021, with the first payment occurring on July 15, 2021.

How Much Are the Advance Payments?

Depends on how old your children are. If your child is under the age of 6 at the end of 2021, you'll get $300 per month. If your child is 6 or older by the end of 2021, you'll get $250 per month. If your child is over 17, you'll get nothing. 

How Will the Payments be Made?

Payments will be made primarily through direct deposit. If the IRS does not have your bank information, then you may receive the credit through debit card or check.

Who Qualifies for the Additional Child Tax Credit?

Anyone who has income below the following thresholds and child dependents under the age of 18 will receive the full credit:

Married Filing Jointly: $150,000
Head of Household: $112,500
Single: $75,000

What Can I Do If I Don't Want to Receive the Advance Payments?

If you are eligible, but would prefer to not receive the advanced money, you will have the opportunity to decline the funds. The date for the portal where this will happen has not been announced.

Opting out of the advance doesn't mean you won't get the credit. It simply means you'll have to wait until you file your 2022 taxes to receive the payment. This is important for parents whose 2020 income would show they qualify, but will actually end up making more than the thresholds in 2021. 

If you switch back and forth claiming your child as a dependent with your child's other parent, you may need to log in to the portal the IRS provides to decline the advances if you will not be claiming the child in 2021.

If I Receive the Advances But Do Not Qualify, Will I Have to Pay the Advances Back?

In a sense, yes. If end up not qualifying, there will be a true up on your 2021 tax return and you may have to pay the money back if you have not had enough withheld to cover the difference.

How Can I Make Sure I Receive My Advances?

The best thing you can do is file your 2020 tax return and include your direct deposit information so the IRS can easily put the money in your bank account.

Is This a Permanent Change?

Not at this point, though it is being discussed as a way to lift children out of poverty and provide basic needs throughout the year.

More details will be announced as the time gets closer. As with every new tax law change since the pandemic, we are all flying by the seat of our pants.

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