How to Get a Monthly Child Tax Credit
The IRS has officially announced this: Advances for the Extended Child Tax Credit – a total of $ 3,600 per child – will be sent to families on the 15th of every month for the rest of the year. Nearly all families are eligible for at least some amount of money, if not the entire amount, although you will need to file a 2020 or 2019 tax return to claim it. Here’s what you need to know.
What is a Child Tax Credit?
The Child Tax Credit is a tax credit for tax declarants with dependent children. The Salvation of America Act raised the maximum child tax credit payout from $ 2,000 to $ 3,600, with half of that amount being paid monthly as a down payment for the last six months of 2021 starting July 15 (the intent is to make the money hit our pockets right away so they can be of maximum benefit to families while we are still dealing with a pandemic). The remaining half of the tax credit can be claimed as part of your 2021 tax return.
How do I qualify for the monthly Child Tax Credit payment?
According to the IRS, over 88% of American families are eligible for the subsidy ; however, the amount you receive will depend on your household income for 2020 and the age of your children. A child under the age of six is eligible for the $ 3,600 payment, and a child over the age of six is eligible for the $ 3,000 payment. Children 18 who are also considered dependents, and full-time college students between the ages of 19 and 24 are also eligible, but only for $ 500 per CNET .
To receive full payments, tax fillers must adjust gross income below the thresholds below on their 2020 tax return (and if not already filed, the IRS will also use your 2019 tax return):
- $ 75,000 for individual taxpayers
- $ 112,500 for the head of the family (a new bill could increase this amount to $ 150,000).
- USD 150,000 for married taxpayers filing jointly and widows / widowers.
Income in excess of these amounts will cause benefits to be phased out at the rate of $ 50 per $ 1,000 of income above the WSJ threshold. (CNET has a useful calculator that you can use here ).
Okay, I’m Qualified – How Do I Get These Monthly Child Tax Checks?
If you’ve filed your 2020 tax return, you don’t need to do anything – payments will be sent as a direct deposit (if you’ve already set this up in the IRS) or as a check mailed.
However, since this is currently a limited time credit for the 2021 tax year, you will need to file a 2020 or 2019 tax return to receive payment, as this is currently the only way to prove to the IRS that your child is eligible. This is especially important if you are not applying under the age of 65 and are earning less than $ 12,000 a year, as you usually do not need to file a tax return for income below that amount. Hence, you will want to file your tax return anyway to avoid leaving thousands of dollars on the table (the IRS is promising to do some outreach to address this issue).
Do I have to refund my monthly child tax credit if I make too much money?
It is important to remember that monthly down payments are based on estimates. And since this tax credit is an advance based on your projected income in 2021 (based on your 2019 or 2020 tax return) and the number of children you have now , both could change for you later this year. This means that you may be eligible for more money if you have another child before the end of the year, which you can claim for taxes for 2021. But the danger is that if you get a raise, or your situation changes in a different way, leading to the income threshold being exceeded, you could also get some or all of the money back when you file your 2021 tax return.
To address this inconsistency, the IRS is creating an online portal where you can update your income, marital status and number of eligible children throughout the year, or opt out of monthly payments altogether and request a one-time loan. instead, on the 2021 tax return. The portal is expected to be operational by July 1.