For 2021 only, the American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit. This change may help families receive advance payments coming up this summer. Expanding the Child Tax Credit means that the credit for qualifying children is fully refundable. This means that taxpayers can benefit from the credit if they do not owe income taxes or do not have earned income. This change also means that the credit amounts will increase for many. The credit will include children who turned 17 in 2021. Finally, taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.
Families who claim CTC in 2021 can receive up to $3,000 per child between the ages of 6 and 17 and $3,600 per child under the age of 6. This has increased by at least $1,000 as the prior law was up to $2,000 per qualifying child under the age of 17.
This increased amount is phased out for married joint taxpayer incomes over $150,000 and qualifying widows or widowers. The increased amount is also phased out for incomes of $112,500 for heads of households and $75,000 for all other taxpayers.
To be sure that you are included and that you are eligible for the correct amount of CTC and any other tax credits you may be eligible for, file your 2020 tax returns as soon as possible. It is also recommended that you file electronically with direct deposit. This may speed refunds and any future CTC payments.
The advanced Child Tax Credit for 2021 will be made regularly this summer, from July through December. To qualify for this you must have a main home in the United States for more than half the year. The information included in your 2020 tax returns will be used to estimate advance payments. If your 2020 returns are not filed or processed yet, your 2019 returns may be used to estimate an advance payment. Up to 50 percent of the Child Tax Credit will be the total of the advance payment.
If you are an eligible taxpayer who does not want to receive advance payments of the Child Tax Credit, you will have the option to decline. If you need to update your information for any of the following reasons: changes in income, changes in filing status, or changes in the number of qualifying children, you will have the opportunity to do so. Information on these steps will be announced shortly. The IRS will update with more information soon.
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