Beginning July 15, 2021, over 39 million households of U.S. parents, or 88% of families across the U.S. with children under 18, will receive the first of 6 monthly payments for the enhanced Child Tax Credit (CTC) ahead of Summer 2021. The IRS will pay half of the total credit amount upfront, and you will claim the other half when you file your 2021 income tax return.
Why Is This a Big Deal?
According to Vox, July 15, 2021, could end up being of the most critical days in the history of America regarding its Anti-poverty policy. Many other rich countries, such as Germany, Canada, Great Britain, and Spain, have implemented child allowances, proving that poverty can be reduced, and children’s health, family time, and even incomes can be raised with these programs.
“Expansion of tax credits and cash payments will reduce child poverty, particularly for Black and Latino/a/x families.”
Why Are Parents Getting These Payments?
Remember the American Rescue Plan? It was passed in March 2021, and it qualifies kids up to 17 years old. The recent changes to the plan modified the income requirements. To help those families who need it, the government place caps on the upper band of the incomes rather than an income minimum. For the first time, the credit will be available to people who do not need to pay federal income tax, perhaps because they have been out of work; before, “the refundable portion was limited to $1,400 per child.”
Who Qualifies for The Full Value Of The Child Tax Credit?
According to the IRS, the income limits are “$75,000 or less for singles, $112,500 or less for heads of household and $150,000 or less for married couples filing a joint return and qualified widows and widowers.”
Those making over these amounts will receive partial payments up to a certain level regardless of income, whether families will receive the total value of the original credit, $2,000. Then, for every additional $1,000 above the limits, the credit value is reduced by $50.
If you have dependent children and your income is less than $150,000 (married and filing jointly), you qualify for a maximum of $300 for each child under the age of 6 and $250 for each child between 6-17 years old. You will receive a monthly payment through December 2021. The other half will be visible as a credit on your 2021 tax return. The total tax credit is up to $3,600 for children under the age of 6 and $3,000 for those with dependents between 6-17 years old.
To be eligible for the Advance Child Tax Credit payments, you — and your spouse, if you filed a joint return — must have:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
- Given the IRS your information in 2020 to receive the Economic Impact Payment using the Non-Filers tool; and:
- A primary home in the United States for more than half the year (the 50 states and the District of Columbia) or filed a joint return with a spouse who has a main home in the United States for more than half the year; and has
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
- Made less than certain income limits.
If you are a parent with dependents between 18-24, unfortunately, you are not eligible for the advance payments; however, you will use the credit on your 2021 tax bill.
The IRS has already sent out over 36 million letters to families who qualify. Didn’t get your letter? No worries, they will be sending a second letter to confirm those families, and we are also going to talk about where you can go to see if you qualify.
What You Will Need
Your tax return filed for 2020, or your 2019 tax return if you haven’t filed for 2020. If you don’t have a copy of the return and know your filing status and the number of qualifying children you claimed, you may be able to estimate the total income from your tax return to answer all the questions. You can use the following to make estimates:
- 2020 tax return or 2019 if you havent filed
- Income statements such as W-2s and 1099s
- Amount of any expenses or adjustments to your income
You may still benefit from the credit even if you aren’t working now or didn’t work in 2020. The IRS says no other information is needed, and if you meet those qualifications, you will automatically be enrolled in the advance payment plan.
Still unsure? Check your eligibility here