You Might Receive Your First Child Tax Credit Payment Today — What to Anticipate

This week marks a significant moment for approximately 39 million families across the United States, including around 65 million children. The government is starting to distribute its initial payments for the extended child tax credits established earlier this year. Although several months have passed since the American Rescue Plan was signed into law by President Joe Biden, many still have questions about the program. Let’s clarify the details.

What is the Enhanced Child Tax Credit?

This initiative provides much-needed assistance to families facing hardships, giving them the support and breathing room they require during these challenging times, stated President Biden when he enacted the enhanced child tax credit. This credit is a component of the American Rescue Plan. For 2021, families can receive a maximum tax credit of $3,600 for children under age 6 and $3,000 for children aged 6 to 17. Payments will be issued monthly throughout the remainder of the year: $300 per month for families with younger children and $250 per month for those with older children. Importantly, there is no cap on the number of children for which a family can claim credits.

Who is Eligible for the Enhanced Child Tax Credits?

Most American families will qualify for some amount of funding. The maximum credit is available to married couples filing jointly with an adjusted gross income under $150,000. Single parents can qualify if their adjusted gross income is below $75,000. The credit gradually phases out for families earning above these thresholds, and individuals earning more than $95,000 or married couples making over $170,000 will be ineligible. Eligibility is determined based on 2020 tax filings.

How Can Families Claim Their Child Tax Credits?

If you have already filed your taxes for 2020 or 2019, there’s no further action required. The IRS will reference your 2020 tax return, or 2019 if the 2020 return hasn’t been submitted, to assess eligibility. Families who qualify but haven’t filed taxes for either year can register through the IRS non-filers tool. It’s also advisable for families to update their direct deposit details via the IRS Child Tax Credit Update Portal, as most payments will be sent through direct deposit; checks will be mailed if direct deposit information is unavailable.

When Can Families Expect Child Tax Credit Payments?

The initial payments are being issued this week, with subsequent payments scheduled for August 13, September 15, October 15, November 15, and December 15. Monthly payments will only be available until the end of this year, allowing families to receive about half of their total credit in installments. Currently, families are expected to claim the remaining half as a refund when filing their 2022 taxes, though this could change.

Can You Opt Out of Child Tax Credits?

You cannot opt out of receiving credits if you qualify, but you can choose to forgo monthly payments and instead collect the entire amount as a lump sum when filing your 2022 taxes. This option may be beneficial for families anticipating a major purchase or a tax bill in 2022. To opt out of monthly payments, visit the IRS Child Tax Credit Update Portal. It’s important to note that it’s too late to cancel the first payment, as the deadline to opt out of the August payment was August 2.

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Summary

This article outlines the essential details of the enhanced child tax credit, including eligibility, payment schedules, and how to claim the credits. With significant support available for families, it’s crucial to understand how the program works and what options are available for managing the payments.