The Child Tax Credit: What You Need to Know
One of the reasons Federal refunds are taking five months to get processed is the development and issuing of the direct payments for parents of children under 17. You’ve heard about it – here are the major takeaways:
- The Child Tax Credit is typically claimed on your tax return and serves to reduce your income and/or provide a tax refund when filing.
- This new enactment will split the credit – half of the credit will be paid to families monthly and the other half will be claimed on your tax return. To get money to families sooner, the IRS will send you half of your 2021 Child Tax Credit this year, starting in July. The goal is to help alleviate the financial burden on families with young children in real time. It will be broken up into monthly payments, which means payments of up to $300 per child under age 6 and $250 per child ages 6 to 17.
- All working families will get the full credit if they make up to $150,000 for a couple or $112,500 for a family with a single parent (also called Head of Household). The American Rescue Plan increased the Child Tax Credit from $2,000 per child to $3,000 per child for children over the age of 6 and from $2,000 to $3,600 for children under the age of 6 and raised the age limit from 16 to 17.
- If you’ve filed tax returns for 2019 or 2020, or if you signed up to receive a stimulus check from the Internal Revenue Service, you will get this tax relief automatically. You do not need to sign up or take any action.
- Don’t want to take the monthly money? You can opt out by visiting the portal (second link below) and take the full credit as per usual on your tax return. This may be an option to consider, especially if your financial situation has changed in 2021. Because – and this is important to note – if you go over the income threshold limit, you will have to pay back the money sent to you.
Visit the link below for further information and for the IRS portal.