Recently, there were changes made to the child tax credit that will benefit many taxpayers. As part of the American Rescue Plan Act that was enacted in March 2021, the child tax credit:
• Amount has increased for certain taxpayers
• Is fully refundable (meaning you can receive it even if you don’t owe the IRS)
• May be partially received in monthly payments
The new law also raised the age of qualifying children to 17 from 16, meaning some families will
be able to take advantage of the credit longer.
The IRS will pay half the credit in the form of advance monthly payments beginning July 15.
Taxpayers will then claim the other half when they file their 2021 income tax return.
Though these tax changes are temporary and only apply to the 2021 tax year, they may present
important cashflow and financial planning opportunities today. It is also important to note that
the monthly advance of the child tax credit is a significant change. The credit is normally part of
your income tax return and would reduce your tax liability. The choice to have the child tax
credit advanced will affect your refund or amount due when you file your return. To avoid any
surprises, please contact our office.
Qualifications and how much to expect
The child tax credit and advance payments are based on several factors, including the age of
your children and your income.
• The credit for children ages five and younger is up to $3,600 –– with up to $300 received
in monthly payments.
• The credit for children ages six to 17 is up to $3,000 –– with up to $250 received in
To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax
return) must have:
• Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your
information using the non-filer tool
• A main home in the U.S. for more than half the year or file a joint return with a spouse
who has a main home in the U.S. for more than half the year
• A qualifying child who is under age 18 at the end of 2021 and who has a valid Social
• Income less than certain limits
You can take full advantage of the credit if your income (specifically, your modified adjusted
gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and
$112,500 for head of household filers. The credit begins to phase out above those thresholds.
Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or
other filers with $200,000 or less in income) will generally get the same credit as prior law
(generally $2,000 per qualifying child) but may also choose to receive monthly payments.
Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will
use the information it has on file to start issuing the payments.
IRS’s child tax credit update portal
Using the IRS’s child tax credit and update portal, taxpayers can update their information to
reflect any new information that might impact their child tax credit amount, such as filing status
or number of children. Parents may also use the online portal to elect out of the advance
payments or check on the status of payments.
The IRS also has a non-filer portal to use for certain situations.
Let us help you.
With any tax law change, it’s important to revisit your full financial roadmap. We can help you
determine how much credit you may be entitled to and whether advance payments are
appropriate. How you choose to receive the credit (partially advanced via monthly payments or
solely on your next year’s return) could have many impacts to your financial plans.
As always, planning ahead can help you maximize your family’s financial situation and position you for
K. Rohrs, CPA