There have been important changes to the Child Tax Credit that will help many families receive advance payments starting on July 15, 2021. The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for tax year 2021 only.
The expanded credit means:
- The credit amounts will increase for many taxpayers.
- The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
- The credit will include children who turn age 17 in 2021.
- Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.
For tax year 2021, families claiming the CTC for tax year 2021 will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.
The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).
The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the CTC as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit (EITC). Filing electronically with direct deposit also can speed refunds and future advance CTC payments.
Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.
For more details, visit the IRS webpage: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
or visit the White House website with information on the topic: https://www.whitehouse.gov/child-tax-credit/
NOTE: The Child Tax Credit or other tax credits that individuals are eligible for, will not affect an immigration status, an ability to get a green card, or an individuals future immigration plans. Use of tax credits is not considered in a “public charge” determination by U.S. Citizenship and Immigration Services.
The following is primarily summarized from Publication 972: Child Tax Credit (https://www.irs.gov/forms-pubs/about-publication-972) posted on the Internal Revenue Service (IRS) website.
WHAT IS THE CHILD TAX CREDIT?
The Child Tax Credit (CTC) is a tax credit for single or married workers earning low or moderate incomes who have dependent children under age 17. Workers who qualify for the CTC and file a federal tax return can receive a credit of up to $2,000 per child and a $500 nonrefundable credit for qualifying dependents other than children. The amount of the credit will depend on the worker’s income. Workers whose earnings are too small to have paid taxes may also be eligible for the CTC.
WHO IS ELIGIBLE FOR THE CHILD TAX CREDIT?
To be eligible for the CTC refund, a single or married worker must:
- Be able to claim an exemption for one or more dependent children under age 17 on his or tax return.
- Have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). ITINs are issued by the IRS (http://www.irs.gov/Individuals/Individual-Taxpayer-Identification-Number-ITIN) to individuals who are unable to obtain a SSN. Immigrant workers with either type of number may be eligible for the CTC.
SOURCES: 2-1-1 database; Publication 972 : Child Tax Credit posted on the Internal Revenue Service website