Answers to Your Questions About the 2021 Child Tax Credit
As you may be aware, the U.S. government has expanded the child tax credit for 2021 as part of the American Rescue Plan Act. At MCCU, we want to help you understand these changes and the ways they could affect your family. See below for answers to some frequently asked questions about the 2021 child tax credit, along with links to additional resources from the IRS.
What’s changed for 2021?
Although the child tax credit itself is not new, it has been updated for 2021 in some important ways. These changes include:
- Expanded eligibility to include children turning 17 in 2021
- Bigger maximum credit amounts
- Automatic partial payment in advance for qualifying families (based on estimated eligibility)
- Expanded eligibility to include parents who don’t have an income or owe income tax
What do these changes mean for me?
Unlike other years, when you’ve had to wait until you file your taxes to claim the child tax credit, this year the IRS will be making payments in advance to most qualifying families, either by check or direct deposit. Qualifying families will typically receive half the credit amount in monthly installments between July 15 and the end of the year. They will receive the other half after claiming the credit on their 2021 tax returns.
Who qualifies for advance child tax credit payments?
Advance child tax credit payments will be made to families that meet certain income requirements and have at least one qualifying child who will be age 17 or younger at the end of 2021. In general, the following income thresholds apply:
- $75,000 or less for single taxpayers
- $112,500 or less for heads of household
- $150,000 or less for married couples filing jointly (and qualifying widows and widowers)
Families that exceed these thresholds may still receive a partial credit, depending on income.
How do I know if I’m eligible?
You can check your eligibility online at the IRS website here. To use the IRS eligibility assistant, you will need to refer to a copy of your 2020 tax return, or your 2019 return if you haven’t filed yet for 2020. You may still be able to use the tool to estimate your eligibility even if you don’t have your tax documents handy, as long as you are able to answer some questions about your income and filing status.
How much will I receive?
The size of your 2021 child tax credit payments depends on your specific income and other factors. However, eligible families can typically receive up to $3,000 per qualifying child ages 6 to 17, and up to $3,600 per qualifying child age 5 and under. Families who qualify for advance payments can receive up to $250 per month for each child age 6 to 17, and up to $300 per month for each child under 6 through the end of 2021.
How do I get my payment?
In most cases, if you’re eligible for the 2021 child tax credit and you filed taxes in 2019 or 2020, you don’t need to do anything to receive your advance payments. The IRS will use the information you’ve provided in the past to evaluate your eligibility and automatically enroll you for advance payments if you qualify. However, if your circumstances have changed since you last filed taxes, or if you have not filed yet for 2019 or 2020, you may need to provide the IRS with additional information. To learn more about receiving your payments, including information for non-filers, visit the IRS website here.
What else should I know?
While this year’s advance payments may allow you to collect your child tax credit sooner, it’s important to keep in mind that the payments are based on an estimate of your eligibility at the end of 2021 — and if you are paid more than you end up qualifying for, you could be required to repay the IRS for any extra when you file your taxes. This could happen, for example, if your income increases substantially in the second half of 2021 and makes you ineligible for the credit after you receive payment. See the FAQ page on the IRS website to learn more about updating your information or unenrolling from advance payments to avoid overpayment.
MCCU does not provide tax or legal advice. Please consult with your own professional services provider for more information on the credit and related matters. This information is provided for general information purposes only.