How Recent Changes to the Child Tax Credit May Affect Your Family
The American Rescue Plan Act, signed into law on March 11, 2021, included numerous programs to help small businesses, individuals and their families through financial insecurity and stimulate the economy. One of the progams provided direct payments of up to $1,400 to millions of qualified people.
Now, eligible families with children aged 17 and under will start receiving monthly payments through the end of the year under the widely expanded Child Tax Credit. Changes for 2021 are projected to help cut childhood poverty in half. Read our guide to learn about recent updates to the Child Tax Credit, including how much you can expect and where you can go to see if you qualify.
What is the Child Tax Credit Program?
The Child Tax Credit program provides financial assistance for low- to middle-income households with children 17 and under. Recent changes for 2021 under the American Rescue Plan Act now provide monthly payments for half the total benefit amount through the end of the year. Eligible families will receive six payments of up to $300 per child under age 6 and up to $250 per child ages 6 to 17. The remainder of the credit will be claimed with the appropriate tax return. Previously, the benefit maxed out at $2,000 per child and was collected the following year when most recipients filed their taxes.
How Does My Family Sign Up for the Child Tax Credit Program?
To qualify for the Child Tax Credit benefit, you must have either filed a 2019 or 2020 tax return, or use the non-filer sign-up tool located on the IRS.gov website. If you previously used the IRS non-filer sign-up tool to receive the economic stimulus payment, you do not need to complete this step again. Based off the information provided, the IRS automatically enrolls eligible households into the program. Enrolled recipients should also receive letters in the mail regarding estimated payments and other important information.
How Much Will My Family Receive From the Program?
The program provides up to $3,600 per child under 6 and up to $3,000 per child ages 6 through 17 to eligible taxpayers based off of the appropriate tax filer’s modified adjusted gross income (AGI). Child Tax Credit changes for 2021 mean that eligible families will now start to receive monthly payments for half of the total benefit amount, up to $300 per child under 6 and $250 per child ages 6 through 17, through 2021. Since the Child Tax Credit program aims to help low- to middle-income families, payments are phased out for those earning over certain income thresholds.
The maximum Child Tax Credit benefit is available for taxpayers with an adjusted gross income (AGI) up to the following income thresholds:
$75,000 if filing as an individual, single tax filer or married person filing separately
$112,500 for heads of household
$150,000 for married couples filing a joint tax return or qualified widow/widower
Though the benefit is phased out for higher-income taxpayers, you may still qualify for the tax credit if your income is close to the appropriate income level listed above. If you want to calculate your monthly benefit amount, you can use this tool to estimate your payments or calculate your tax credit.
How Are the Child Tax Credit Monthly Payments Sent?
The IRS will send monthly payments to eligible taxpayers through December 2021. The remainder of the benefit will be claimed when most recipients file taxes the following year. If you need to update your information, unenroll from the program or manage monthly payments, you can use the IRS portal.
What Should I Do if My Family No Longer Qualifies for the Program?
Since the IRS used information collected from the most recent tax filing, or from the non-filer sign-up tool for program enrollment, it may not have the most up-to-date income data for your household. As a result, some program enrollees may no longer qualify for the program. This may be true for those who lost a job, took a lower paying position or were temporarily unemployed during the pandemic, but have since moved on to higher-paying employment once the economy improved. If your income has changed in the last year, you may want to check if you qualify for the Child Tax Credit program.