June 1, 2021
Eligible parents will soon begin receiving payments from the federal government. The IRS announced that the 2021 advance Child Tax Credit (CTC) payments, which were created in the American Rescue Plan Act (ARPA), will begin being made on July 15, 2021. How have child tax credits changed? The ARPA temporarily expanded and made CTCs refundable for 2021. Refundable, in this instance, means that if you qualify for the credit and the amount of the credit is larger than the tax you owe, you will receive a refund for the difference. The law increased the maximum CTC — for 2021 only — to $3,600 for each qualifying child under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents’ income is below a certain threshold.
Advance payments will be issued up to $300 monthly for each child under 6, and up to $250 monthly for each child 6 and older. The increased credit amount will be reduced or phased out for households with modified adjusted gross income above the following thresholds:
• $150,000 for married taxpayers filing jointly and qualifying widows and widowers;
• $112,500 for heads of household; and
• $75,000 for other taxpayers.
Under prior law, the maximum annual CTC for 2018 through 2025 was $2,000 per qualifying child but the income thresholds were higher and some of the qualification rules were different.
Important: If your income is too high to receive the increased advance CTC payments, you may still qualify to claim the $2,000 CTC on your tax return for 2021.