Important things you need to know about the 2021 Advance Child Tax Credit
As part of the American Rescue Plan released earlier in 2021, families across the United States are benefitting from the Advanced Child Tax Credit. Starting on July 15th, parents started receiving up to $300/month for every dependent child between 0-6 and $250/month for every child between the ages of 6-17. For many, this has been a welcome relief. However, there are still a lot of questions parents have about the tax credit.
Here are five things you should know about the 2021 Advance Child Tax Credit:
1. This is not extra money.
One common misunderstanding is that the money received in the advanced tax credit is extra money on top of what is normally received in credits at tax time. This is not new, extra money, but rather an advanced payment on the expected credit you would normally receive when you file your 2021 taxes. So when it comes time to file your taxes, you will only receive the amount of the child tax credit not already paid in advance.
2. This won’t last forever…we think.
Although there have been discussions about extending the advance payments beyond December 31, 2021, as of right now that is the cutoff. Which means you will receive half of the total expected Child Tax Credit in advance, the other half when you file taxes.
3. If you filed taxes last year, you shouldn’t have to do anything to receive the advanced credit.
The IRS will send payments to whatever account you have on file from your previous taxes. This means that you if you have direct deposit set up for your taxes, the money will come directly into your account on the 15th of the month. If you received a check for your refund, they will mail you the check on the 15th.
If you did not file taxes in the previous year, or are not planning on filing taxes, you can still check to see if you qualify.
4. There is an income limit for receiving the advanced credit.
For single filers earning more than $75,000 in taxable income and married filing jointly who earn more than $150,000 in taxable income, the payments begin to taper off. Only families making less than the limit will receive the full credit.
5. You can opt out of receiving the Advanced Child Tax Credit if you’d like.
For some families, it may make more sense to receive the full Child Tax Credit when you file taxes, so there is a way to opt out of receiving the payments in advance. To opt out of advanced payments, visit: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
We want you to earn more, save more and do more financially. Please contact us for any other questions, or speak with a tax professional.
