Families are getting a much-needed boost this summer. A financial boost, that is.
As of July 15, 2021, the IRS is paying half of the total Child Tax Credit, typically claimed with yearly income tax returns, in advanced monthly payments. For families who have taken a financial blow during the Covid-19 pandemic, this is really great news.
As with anything IRS-related, there’s a laundry list of qualifications and details determined by your income, dependents, and the way you file. Don’t sweat the details, though — we’ve compiled everything you need to know about the Advance Child Tax Credit.
The Advance CTC Rundown
The Child Tax Credit (CTC) is, simply, a tax credit given to parents with dependent children. This year, the American Rescue Plan Act (AKA the Covid-19 Stimulus Package) has expanded the credit from $2000 to $3000-$3600 (depending on the child’s age). If eligible, certain households can opt to have half of the credit paid in advance with monthly payments.
Do I Qualify?
There are a few things that affect your dependent’s eligibility for the Advance CTC:
- They must be younger than 18 at the end of 2021.
- They must have a valid Social Security Number.
- They must be either your own child, an adopted child, a legal foster child, a step child, a sibling, a step-sibling, or descendants of any of these — as long as they pass all other qualifications.
- They must be either a U.S. citizen, a U.S. National, or a U.S. resident alien.
- They must have lived with you for more than half the 2021 tax year
How Much Can I Get?
The total CTC for the 2021 tax year is $3,600 for children aged 5 and under by the end of 2021, and $3,000 for children ages 6 to 17 by the end of 2021. With the monthly advance payments, you could receive $300 a month, totaling $1800 by the end of the year, or $250 a month, totaling $1500 by the end of the year. Your household’s income can also affect how much you’re credited — if you exceed certain income limits, your credit can reduce drastically. Check out this Child Tax Credit Calculator to see just how much your CTC will amount to.
How Do I Enroll?
Surprise — you’re already enrolled. The IRS uses information provided in previous tax returns to automatically enroll your household for the Advance CTC. There’s no additional action needed from you.
How Will This Affect My 2021 Tax Return?
When a tax credit goes up drastically, the natural next question is: does this mean I’m going to owe more? So much can change in a tax season — pay decrease, pay increase, amount of dependents. There are a couple of things you can do to make sure the new tax credit doesn’t result in more money owed.
- Look out for a Letter 6419 from the IRS in the mail during January 2022. This letter will detail all the advance payments, and you may need to refer to it when you file your taxes next year.
- Make other changes — address, income, dependents, direct deposit information — using the Child Tax Credit Portal.
The Advance Child Tax Credit is a huge boost for families who have taken a hit during the pandemic. Find out more about the credit and payments on the IRS website.