Payments For The New $3,000 Child Tax Credit Start July 15th!
The IRS is set to begin advanced payments of the enhanced child tax credit (CTC) on July 15, and 88% of families with children in the U.S. will get the benefit automatically. The enhanced credit, a component of President Joe Biden’s American Rescue Plan (ARP), increases the existing tax benefit eligible families can receive from $2,000 up to $3,000 for kids between the ages of 6 and 17, and up to $3,600 for kids under 6.
The IRS is paying out 50% of these credits to qualifying families in advance, starting July 15.
Who qualifies for the child tax credit?
Almost 90% of families with children in the U.S. qualify for the monthly payment. Filers with adjusted gross incomes below the following levels will qualify for the full monthly payment:
- $75,000 for individual taxpayers
- $112,500 for heads of household
- $150,000 for married taxpayers filing jointly, and widows/widowers
The payments will be reduced by five cents for each dollar above those income thresholds
What action do families need to take to receive the payment?
Most families won’t have to do anything. Similar to the stimulus payments, the CTC payments will be automatically direct deposited into taxpayer bank accounts, or sent in the form of a prepaid debit card or paper check, depending on what information the IRS has on file for each qualifying taxpayer.
But non-filers will need to take action.Even those who made too little to file a 2020 tax return should do so now in order to receive the advanced monthly CTC payments.
Qualifying taxpayers will receive a payment even if they don’t have any earned income or earn too little typically to owe taxes.
How much are the payments worth?
$300 each month for each dependent under the age of 6 as of 12/31/21 or
$250 each month for each child between the ages of 6 and 17 as of 12/31/22
A family will receive a maximum of $3,600 for each kid under 6 for tax year 2021, and a maximum of $3,000 for older kids. An eligible family with a 3-year-old, a 6-year-old and a 17-year-old will receive an extra $800 each month from July through December, and another lump sum next tax season. (2022)
When will the first payment be made?
IRS has scheduled the first payment for July 15. Subsequent payments will be made on the 15th of each month in 2021 (unless the 15th falls on the weekend or is a holiday). That means taxpayers will receive a maximum of $1,500 to $1,800 per qualifying child through the end of the year.
What about payments for the first six months of the year?
Technically, these are “advanced” payments, as it is not the 2021 tax filing season yet. (we would normally receive tax credits for 2021 when we file our taxes in 2022). But the federal government doesn’t want taxpayers still struggling financially from the Covid-19 pandemic to wait another year to receive some of the money. The payments will be estimated based on each taxpayers’ 2020 tax returns (or 2019 returns if they have not filed 2020 yet).
Taxpayers will receive payments for January through June 2021 when they file their returns in 2022.
Those who are overpaid or underpaid this year based on their last tax return will correct their payments when they file their 2021 return next year.
Will the tax credit be extended past 2021?
Currently, the enhanced tax credit expires after December 2021. But Biden’s American Families Planseeks to extend it for four more years, through 2025.
The IRS also notes that people will be able to opt out of the advanced payments if they want to, make updates if their income, filing status or number of qualifying children changes. They are setting up online portals for taxpayers to make these changes; it is not yet available, but updates are expected before July 15.