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child tax credit

The IRS says that eligible families with children ages 17 or younger will start getting the first monthly cash payments from the federal Child Tax Credit on July 15. Qualifying families will get up to $3,600 for each child under 6 years old and $3,000 for each child between the ages of 6 and 17. Let’s break down how and when your family could get this credit. (SmartAsset’s calculator below will help you figure out payments based on your information.)

If you’ve got tax credits and stimulus checks headed your way, a financial advisor can help you plan the best way to this money.

Child Tax Credit: American Rescue Plan Changes

The American Rescue Plan, which was signed into law by President Joe Biden on March 11, 2021, includes a number of measures aimed at easing economic pressure on American families. In addition to a third round of stimulus checks sent directly to millions of taxpayers, the plan also temporarily expands the child tax credit from $2,000 per child to as high as $3,600 for the 2021 tax year. Half of the credit amount will be paid in advance in installments, and the other half will be claimed by families on their tax returns next year.

Previously, the child tax credit provided $2,000 per child up to the age of 16. Under the American Rescue Plan, the amount and eligibility is expanded: The credit is now worth $3,000 for children between the ages of 6 and 17, and $3,600 for children under 6. Normally, families must have taxable earnings of at least $2,500, but the plan temporarily eliminates that requirement.

Biden’s plan also makes the credit fully refundable for tax year 2021. Before then, the credit was only partially refundable up to $1,400. That meant that if qualifying taxpayers had zero tax liability – that is, they didn’t owe any money on their tax return – then the IRS would only pay up to $1,400 of the remaining credit amount as a refund. Under the new rules, the entire credit may be taken as a tax refund.

This increased payment is phased out for wealthier families. The tax break begins to phase out at $75,000 for single returns, $112,500 on head of household returns, and $150,000 on joint returns. Essentially, the increased payment goes down by $50 for every $1,000 earned above the limit. The previous credit of $2,000 per child is still available subject to an upper income limit of $400,000 for married couples and $200,000 for individuals.

Wondering how much you’ll receive as a result of these changes? SmartAsset’s calculator will break down payments based on your information:

Child Tax Credit: What Is It?

The child tax credit is an existing credit for parents of children under the age of 17. In a normal, non-pandemic-impacted year, the credit is for $2,000 per child for all parents earning less than $400,000 per couple ($200,000 for single parents). The credit is reduced by 5% of total income above the limit for parents earning more than that. Keep in mind that this is a tax credit, not a tax deduction, which means that the money is credited directly to the taxes you owe the federal government, not deducted from your taxable income.

If the money owed to you from the tax credit is bigger than the taxes you owe, you can get up to $1,400 of the credit in the form of a refund.

How and When Will You Receive the Credit?

As noted above, for this year, parents can get some of their tax credit back in the form of direct payments, ahead of filing their 2021 taxes next year. Up to half of the credit can be paid to these parents in monthly installments starting July 15, 2021, and continuing through December 2021. The IRS table below breaks down the specific schedule:

2021 Advance Child Tax Credit Payment Schedule
Disbursement Month Disbursement Day
July 15
August 13
September 15
October 15
November 15
December 15

An estimated 39 million households with some 65 million children are expected to receive the temporary benefit. Parents who qualify will receive $300 monthly for each child under age 6 and $250 for each one between 6 and 17.

The first half of the child credit payments will be made automatically based on the family’s 2020 tax return. Eligible families who submitted bank account information to get benefits from the Social Security Administration, Department of Veterans Affairs, or the Railroad Retirement Board could also get a direct deposit. Payments will also get sent via mail to those without direct deposits.

Qualifying families can claim the other half of the child tax credit when they file 2021 taxes in early 2022.

What Happens If You Do Not Get Your Child Tax Credit?

The U.S. Treasury Department said on July 15 that the families of almost 60 million children got $15 billion in the first monthly payment of the 2021 Child Tax Credit. Eligible recipients received up to $300 in July for each child under 6, and up to $250 for each child over 6 and under 17.

If you are one of those eligible recipients and you did not get a payment, or you received the incorrect amount, the IRS says to verify your information on the Child Tax Credit Update Portal.

For cases where the portal shows that a payment has already been disbursed and it has not been received, a trace or inquiry to locate funds can be filed by mailing or faxing Form 3911 to the agency.

Note that payments could be delayed depending on the disbursement method. The IRS says that it will not be able to trace payments until:

  • 5 days after the deposit date and the bank says it hasn’t received the payment
  • 4 weeks after the payment was mailed by check to a standard address
  • 6 weeks after the payment was mailed, and you have a forwarding address on file with the local post office
  • 9 weeks after the payment was mailed, and you have a foreign address

The agency will also update its frequently asked questions page with information about Child Tax Credit payments and post any notifications about delays.

Bottom Line

The Child Tax Credit is an existing program that reduces the tax burden of families with dependent children. For the 2021 tax year, the program has been expanded to give bigger checks to parents, allow more of the credit to get refunded, and allow families to get an advance on their refund in the second half of this year.

It’s important to keep up with the latest developments to know what type of aid you could qualify for. You can find other relief programs at the federal government help center and our list of coronavirus relief programs by state.

Tax Tips for Families

  • A financial advisor can help you plan for your family’s financial future. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Income taxes can be confusing, especially as your family grows. Use SmartAsset’s free income tax calculator to see exactly what you might owe Uncle Sam this year.

Photo credit: ©iStock.com/Geber86

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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