Many of our clients have had questions about the 2021 Advance Child Tax Credit – let’s cover some of the questions that you may be wondering.
What is the Amount of the 2021 Child Tax Credit?
For this year, the Child Tax Credit has been increased from $2,000 per qualifying child to: (a) $3,600 for children under the age of 6; and (b) $3,000 for children ages 6-17.
For 2021, a qualifying child is an individual who:
- Is the taxpayer’s child (including stepchild and eligible foster child), sibling (including step siblings and half siblings), or a descendent of any of them
- Does not provide more than half of their own support during the year
- Lives with the taxpayer for more than half of the year
- Has been properly claimed as the taxpayer’s dependent
- Does not file a join return with their spouse for the year or file it just to claim a refund of withheld income tax or estimated tax paid
- Is a U.S. citizen, national, or resident alien
The amount of credit you receive is reduced based on the amount of your modified adjusted gross income (AGI) for the year and on your filing status. Your AGI for the year is your gross income minus any deductions.
Once your AGI goes over a certain amount, your Child Tax Credit amount is reduced by $50 for every $1,000 that your AGI exceeds the threshold.
If you are a single filer or married filing separately, your Child Tax Credit begins to reduce to $2,000 per child once your AGI goes over $75,000 without exceeding $200,000. Once your AGI goes over $200,000, your credit amount is reduced below $2,000.
If you are filing as head of household, your credit amount begins to reduce to $2,000 per child once your AGI is between $112,500 and $200,000. Once your AGI exceeds $200,000, your Child Tax Credit is reduced below $2,000.
If your filing status is married filing jointly or qualifying widow(er), your Child Tax Credit amount begins to reduce to $2,000 per child once your AGI is between $150,000 and $400,000. If your AGI goes over $400,000, your credit amount is reduced below $2,000.
What is the 2021 Advance Child Tax Credit?
The advance Child Tax Credit consists of payments from the Internal Revenue Service (IRS) equal to 50% of your estimated Child Tax Credit for 2021. You can earn up to $300 per month for each qualifying child under the age of 6 and up to $250 per month for each child between ages 6-17. The payments last for 6 months, starting in July and ending in December. You still can receive the advance Child Tax Credit payments even if you have $0 in income or don’t owe any income taxes.
The advance Child Tax Credit payments are not considered income, so they won’t be reported as income on your 2021 tax return. In January 2022, the IRS will send you Letter 6419. This document will tell you the total amount of advance payments that you received during 2021.
You can visit here if you would like to:
- Check if you’re enrolled to receive advance payments
- Unenroll from advance payments
- Provide or update your bank account information for monthly payments that will be sent starting in August
Who Qualifies for the Advance Child Tax Credit Payments?
There are 4 requirements to receive the advance Child Tax Credit. You must have:
- Claimed the Child Tax Credit on your 2019 or 2020 tax return or used the Non-Filers: Enter Payment Info Here tool in 2020 to receive the Economic Impact Payment.
- A main home in the U.S. for more than half of the year. Your main home can be a house, apartment, mobile home, shelter, or temporary lodging. If you are temporarily not living in your main home due to illness, education, business, vacation, or military service, you are still considered to be living in your main home. This requirement is also met if you file a join return with a spouse who has a main home in the U.S. for more than half the year.
- A qualifying child with a valid Social Security number. You can see what the qualifying child requirements are in the section What is the Amount of the Child Tax Credit? You (and your spouse if you are married filing jointly) must also have a valid Social Security Number or an IRS Individual Taxpayer Identification Number.
- Made less than certain income limits. You can see what the income limits are in the section What is the Amount of the Child Tax Credit?
You can use the Advance Child Tax Credit Eligibility Assistant to check if you are eligible for advance Child Tax Credit payments. If you have not filed your 2020 or 2019 tax return because you weren’t required to file, you can use the Non-Filer tool to register for the advance Child Tax Credit payments.
When Will I Receive My Advance Payments?
Advance Child Tax Credit payments will be sent out each month, starting in July and ending in December. You will receive them on the 15th of each month, excluding August. In August, you will receive the advance payment on the 13th. If the IRS has your bank account information, the payments will be sent to you as a direct deposit. Otherwise, you will receive them by mail. The IRS gathers your bank account information from your 2020 tax return, your 2019 tax return, or a federal agency that provides benefits to you.
Can I Unenroll from the Advance Payments?
Yes, you can unenroll from the 2021 advance payments using the Child Tax Credit Update Portal (CTC UP). You must apply for unenrollment 3 days before the first Thursday of the next month. Once you unenroll, you cannot re-enroll until late September of this year.
If your filing status is married filing jointly and you unenroll, your spouse will still receive half of the joint payment. If you both don’t want to receive the advance payments, then you both have to unenroll.
There are a couple of reasons why you might want to unenroll from the advance Child Tax Credit payments. One reason is that every dollar that you receive from the advance payments will reduce the amount of the Child Tax Credit that you will claim on your 2021 tax return. Because of this, your tax refund may be reduced or you will owe a greater amount of tax. A second reason why you may want to unenroll is if you know you won’t be eligible for the 2021 Child Tax Credit.