The IRS has made it official: Advance payments for the enhanced child tax credit—worth a total of $3,600 per child—will be sent out to families on the 15th of each month until the end of the year. Almost all families qualify for at least some cash, if not the full amount, although you’ll need to file a 2020 or 2019 tax return to claim it. Here’s what you need to know.
What is the child tax credit?
The child tax credit is a tax break for tax filers with dependent children. As part of the American Rescue Act, the maximum tax credit payout per child was boosted from $2,000 to $3,600, with half of that being paid out monthly as an advanced cash payment for the last six months of 2021, starting July 15 (the intention is to get money in pockets right away so it can do families the most good while we’re still dealing with a pandemic). The remaining half of the tax credit can then be claimed as part of your 2021 tax return.
How do I qualify to receive a monthly child tax credit payment?
According to the IRS, over 88% of American families qualify for the subsidy; however the amount you receive will vary based on your household income for 2020, as well as the age of your kids. A child under the age of six qualifies for a $3,600 payment, and a child over the age of six qualifies for $3,000. Kids who are 18 and also considered dependents, as well as full-time dependent college students between the ages of 19 and 24, also qualify, but only for $500, per CNET.
To receive the full payments, tax filers must have adjusted gross incomes below the below thresholds on their 2020 tax return (and if that’s not filed yet, the IRS will also use your 2019 return):
- $75,000 for individual taxpayers
- $112,500 for heads of household (a newly proposed bill might raise this amount to $150,000)
- $150,000 for married taxpayers filing jointly, and widows/widowers
Income higher than these amounts will result in a benefit phase out, at a rate of $50 per $1,000 of income above the threshold, per WSJ. (CNET has a useful calculator that you can use, here).
Okay, I’m qualified—how do I get these monthly child tax credit checks?
If you filed your 2020 tax return, you don’t need to do anything—the payments will be sent as a direct deposit (if you already have that set up with IRS) or as a mailed check.
However, since this is, for now, a limited-time credit for the 2021 tax year, you’ll need to file a tax return for 2020 or 2019 to receive the payment, as that’s currently the only way to prove to the IRS that your child is eligible to receive it. This is especially important if you’re a non-filer under 65 who makes less than $12,000 a year, as you’re not normally expected to file a tax return for earnings below that amount. Therefore, you’ll want file a tax return anyway to avoid leaving thousands of dollars on the table (the IRS is promising to do some outreach to address this problem).
Will I have to pay back the monthly child tax credit if I make too much money?
It’s important to remember that the advanced monthly payments are based on estimates. And since this tax credit is an advance based on your projected 2021 income (based on your 2019 or 2020 return) and the number of kids you have now, both could change for you later in the year. That means you might actually qualify for more money if you have another child before the end of the year, which you can claim on your 2021 taxes. But the danger is that if you get a raise or your situation otherwise changes in ways that cause you to exceed the income threshold, you could also wind up owing some or all of the money back when you file your 2021 tax return.
To deal with this discrepancy, the IRS is building an online portal where you will be able to update your income, marital status, and the number of qualifying children throughout the year, or choose to skip the monthly payments altogether and claim a lump sum credit on your 2021 tax return instead. The portal is expected to be online before July 1.