Advanced Child Tax Credits
Got kids? Then there’s some good news coming your way. The IRS began advanced payments of the enhanced child tax credit on July 15.
The enhanced credit is a provision of the American Rescue Plan. It increases the tax benefit from $2000 to $3000 for kids age 6 to 17. Families with children under 6 can receive a credit of up to $3600. 88% of families in the United States will be eligible.
These types of payments are usually distributed as tax refunds, but on July 15 they started to be distributed monthly. Because payments will be going out halfway through the year, families will be getting payments to cover the first half of the year as tax refunds on their 2021 taxes.
Families that have direct deposit set up will see the money show up in their checking accounts. Those who do not have direct deposit will get payments via check or debit card.
Monthly payments of up to $300 will be made for children 6 years and older. Payments of up to $250 will be made for children 6-17. The money will be paid out on the 15th of each month unless that date falls on a weekend or holiday.
Do I Qualify?
Most taxpayers in the United States with children will qualify for the child credit. A full payment will be made to individuals who fall in the following income brackets:
- Individual taxpayers who make $75,000 or less
- Heads of household that make $112,500 or less
- Married or jointly filing taxpayers or widows or widowers that make $150,000 or less
Payments will be reduced by five cents for each dollar the taxpayer makes above these income thresholds. Democrats are also considering a bill that will allow heads of household to receive the credit if their income is up to $150,000.
Because the child credit is refundable, taxpayers will still get the credit even if they didn’t earn any income or if their income level was too low to file taxes.
Will the Tax Credit Be Extended Past 2021?
The enhanced tax credit is currently set to expire after December 2021. but Biden’s American Families Plan is looking to extend it through 2025. However, Democrats in both houses are saying that even the 2025 extension is not enough, and they are looking to make the credit permanent.
Do I Need to Do Anything to Get My Credit?
Most families will not need to do anything to collect their credit. Those who have received stimulus checks through the mail or as direct deposits in the past can look forward to getting this credit without taking any action.
Non-filers including those who make too little to file a 2020 tax return will need to file a tax return to get their credits.
It should be noted that people who do not want advanced payments will be able to opt out.
Taxpayers will also be able to make updates to their income, filing status or number of qualifying children if necessary. More details on how to take these steps will be announced soon. The IRS will be setting up online portals where taxpayers can make these changes. The portals are not available yet, but updates must be submitted by July 15.The child credits are being distributed to allow families to better plan their household budgets. In the words of Joe Biden, “For working families with children, this tax cut sends a clear message: help is here.”