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The Internal Revenue Service (IRS) in recent weeks sent eligibility letters to families who qualify for advance Child Tax Credit payments, which started July 15.
The credit was temporarily expanded for 2021 under U.S. President Joe Biden’s American Rescue Plan in March. Not only did the amount of the credit increase, but the credit will be partially paid in advance. This year, eligible families will receive half of the overall amount they qualify for as monthly payments, which will be sent from July through December. That’s equal to up to $300 per month for each qualifying child under age 6, or up to $250 per month for each qualifying child between 6 and 17.
More than 36 million American families can expect to receive letters, the IRS said, based on information in their 2019 or 2020 tax returns. For non-filers, the IRS will use information submitted when registering for Economic Impact Payments last year.
This initial letter will let you know whether you qualify, but you should also expect a second letter from the IRS. The second will contain more information about the specific monthly advance payment amount for which your family qualifies.
Are You Eligible for the Child Tax Credit?
The Child Tax Credit existed before March’s stimulus package, but eligible taxpayers could only claim up to $2,000 per eligible child under age 17. Now, eligible families may claim up to $3,600 per qualifying child under age 6 and $3,000 per qualifying child between 6 and 17.
The eligibility cutoff is based on the modified adjusted gross income (AGI) on your federal tax return (Line 11 on your Form 1040). You’ll be eligible for the full credit amount if your AGI is less than the following, based on your filing status:
- Single: $75,000
- Head of household: $112,500
- Married filing jointly: $150,000
Above these thresholds, the credit you may claim is reduced by $50 for every additional $1,000 in income. However, this only applies to the expanded $1,000 or $1,600 credit amount under this year’s stimulus. You may still qualify for the standard Child Tax Credit of up to $2,000, for which the previous income limits still apply.
How You’ll Receive Child Tax Credit Advance Payments
If you’re eligible, you’ll receive advance credit payments either by direct deposit or by mailed check starting in July. The amount you receive is an estimate based on your latest tax return. For most people, that means your 2020 return filed this year. If you didn’t file this year, or your 2020 return hasn’t yet been processed, the agency will use your 2019 tax return.
If you haven’t yet filed a federal tax return for 2020, filing one as soon as possible can help ensure you receive the full amount for which you’re eligible. Plus, you’ll want to make sure the IRS has your most up-to-date banking information on file so you can receive your payments as quickly as possible via direct deposit.
The IRS has issued the following schedule for advance Child Tax Credit payments:
- July 15
- August 13
- September 15
- October 15
- November 15
- December 15
These advance monthly payments will account for half of the overall credit amount. You’ll receive the rest of the total credit you’re eligible for when you file your 2021 tax return next spring.
More Child Tax Credit Updates to Look Out For
Over the next few weeks, the IRS says it will update its website with tools that can help provide further guidance on Child Tax Credit payments.
This will include a tool to help you determine your eligibility, as well as a portal where you can opt out of advance payments, update your information, and check the status of your payments.