The Child Tax Credit (CTC) helps millions of families with children every year make ends meet, cover large expenses, or put away savings. This year, expansions to the CTC are beneficial to even more families—so it’s important that all eligible families claim the credit. Here’s how the expanded CTC can help you and your family this year.
The CTC is Better Than Ever in 2021
The American Rescue Plan was passed in March and improves the CTC in several important ways. First, it increases the amount of the credit from $2,000 per child ages 0 to 16 to $3,000 per child ages 6 to 17 and $3,600 per child under age 6. Second, it makes the credit fully refundable, which means that families with low or no income can still receive the full value of the credit as a tax refund—benefiting an additional 27 million children. And finally, the IRS gives families the option of receiving advance monthly payments of the CTC of up to $300 per child starting July 15.
Most Families Are Eligible for Advance CTC Payments, Starting in July
Families will receive half of their full CTC amount in advance. For example, a family with two children, ages 8 and 10, would be eligible for a $6,000 CTC for 2021. They would receive monthly payments of $500 ($250 per child ages 6 to 17) around the 15th of every month, starting in July through December 2021. Then they would receive the rest of their CTC ($3,000) when they file their taxes in 2022.
The Treasury Department estimates roughly 39 million households across the country will receive the advance monthly payments, which is close to 90% of families with children! Families that make under $150,000 as a married couple or under $112,500 as a family with a single parent will be able to receive the full credit. Married couples that make under $400,000 and all other families that make under $200,000 will be eligible for a smaller credit.
You Can Receive Advance Monthly Payments–Even if You Didn’t File Taxes This Year
There are two ways to receive the monthly advance CTC payments. If you filed your taxes this year (your 2020 return) or last year (your 2019 return), or you signed up for Economic Impact Payments using the IRS’s Non-Filer tool last year, then you are automatically signed up to receive the advance CTC payments. If you usually get your refund through direct deposit, then your payments will go to your bank account around the 15th of every month. If not, you will receive a check in the mail around the same time. If you would like to opt out of monthly payments or update any of your information (such as your address or the number of children you have), you can use the IRS’s Child Tax Credit Update Portal.
If you did not file your taxes this year or last year and you didn’t sign up for Economic Impact Payments, you can use the IRS’s Non-Filer tool to sign up for advance CTC payments—and receive any stimulus checks you may have been eligible for but did not receive.
You Will Get the Other Half of Your CTC When You File Your Taxes Next Year
Families who choose to receive advance CTC payments will get halfof their CTC amount in the form of monthly payments. They would receive the rest of their CTC when they file their taxes next year (in 2022).
And so, to make sure you receive your full CTC, you need to file your 2021 taxes next year in early 2022, and claim the credit. (You may also be eligible for the EITC and the Child and Dependent Care Tax Credit!) Free tax filing assistance may be available through VITA, Tax Counsel for the Elderly, and Code for America. And you may qualify for free tax filing software if your income is less than $72,000.
This Expansion is Only for One Year
Unfortunately, the American Rescue Plan only improved the CTC for one year. So, unless Congress takes action, families will lose benefits next year when many will still be struggling to recover from the pandemic. Tell your Congress members how important it is for families to make the CTC expansion permanent