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Child Tax Credit to Start July 15

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Expanded child tax credit monthly payments to start July 15

The first monthly payment of the expanded Child Tax Credit (CTC) from the American Rescue Plan will be made on July 15, according to an announcement by the Internal Revenue Service and the U.S. Department of the Treasury. 

Payments will be automatic for those who filed their 2020 tax returns by May 17, this year's tax deadline.

What You Need to Know:

    • Payments will be automatic for those who filed their 2020 tax returns by May 17-  this year's tax deadline.
    • The monthly payments will total $3,600 per child per year under 6 and $3,000 per child from 6 to 17.
    • Joint filers making up to $150,000 per year and single filers making up to $75,000 will qualify for the payments.

Non-filers will need to file a 2020 tax return to get the credit, even if they don’t usually submit tax returns, to let the IRS know how many dependents are in the household who count toward the child tax credit benefits.

Families with joint filers making up to $150,000 per year, single heads of households earning up to $112,500, and other single filers making up to $75,000 will qualify for the payments, which are $3,600 per child under 6 and $3,000 per child from 6 to 17. Families who have no income at all are also eligible.

The payments, however, will be monthly — $300 for children under age 6 and up to $250 for children 6 to 17 — and will begin to phase out at a rate of $50 for every $1,000 over the $150,000 and $75,000 thresholds.

About 39 million households, covering 88% of children in the U.S., will begin to receive the monthly payments automatically, according to the IRS and Treasury.

The payments that begin July 15 are advance payments of the child tax credit for 2021, which will last for only one year unless extended by Congress. They are substantially larger than the  previous credit of $2,000, which applied to families with children 16 years or younger.

The American Rescue Plan also increased the tax credit for child and dependent care for one year, to up to $8,000 for per individual versus $3,000 previously and up to $16,000 for two or more qualifying individuals, compared with $6,000 previously.

The credit was increased to 50% of qualifying expenses, up from 35% previously, and applies to households with adjusted gross incomes of up to $125,000, up from $15,000 previously.

If, after you have analyzed your tax year 2021 and have concluded that it would be best for you to opt-out of the advance payments, it is recommended that you opt-out of payments to avoid potentially having to repay the credit and/or have a balance due on your tax return.   The IRS just provided final guidance on how to opt-out on June 21, 2021. To opt-out, you will need to visit this site:  https://www.irs.gov/credits-deductions/child-tax-credit-update-portal.  Both spouses are each required to opt-out of the advance payments. 

Unenrollment Deadline Payment Date by Month

Unenrollment Deadline Dates

To stop advance payments, you must unenroll 3 days before the first Thursday of next month by 11:59 p.m. Eastern Time.

We recommend consulting a tax professional to analyze your individual tax situation.

The Original Version of this story was published on ThinkAdvisor