Beginning in July, those with children may get deposits into their bank account or paper checks for advance payment of the 2021 Child Tax Credit (CTC). The second stimulus package
(Consolidated Appropriations Act, 2021) includes updates to the child tax credit, making it more accessible to people whose incomes fell during the pandemic.
The expanded credit means:
- The credit amounts will increase for many taxpayers. For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.
- The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
- The credit will include children who turn age 17 in 2021.
- Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.
- The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
- Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year.
Eligible taxpayers who do not want to receive advance payment of the 2021 child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status, or the number of qualifying children. The IRS is expected to release more details soon on how to take these steps.
For more information about how these provisions might affect you, give R&A a call.
About this Author
Laura specializes in income tax return preparation, compliance, and research for individuals and businesses. She also is experienced in preparing compiled and reviewed financial statements, individual and S-Corporation taxation, multi-state taxation, and income tax credits including the R&D credit.