Monthly Advance Payments of the 2021 Child Tax Credit Coming For Some Families Starting in July

As part of the American Rescue Plan (ARP) passed in March, American families are eligible to receive an advance on the expanded child tax credit for 2021. The ARP included a temporary increase in the child tax credit to qualifying families for the 2021 tax year, with the most significant increases for low-income families with children. Previously the child tax credit was $2,000, excluding families with little or no tax obligations from being eligible. Under the ARP legislation, the child tax credit will increase to $3,000 per child and $3,600 per child under six years of age. This temporary initiative also allows 17-year-old children to qualify for the first time.

The advance payments will account for half of a family’s 2021 child tax credit. The amount a family receives each month will vary based on the number of children in the family, their respective ages, and the family’s adjusted gross income (AGI). Monthly payments are expected to begin on July 15th. This year, struggling families could see a monthly check for $250 or $300 from July to December 2021. To determine who is eligible, the IRS will use the 2020 tax returns if already filed. If the 2020 tax return has not been filed, the IRS will rely on the 2019 tax return for eligibility. The credit will be phased out for those with an adjusted gross income of $75,000 on single returns, $112,500 on head-of-household returns, and $150,000 on joint returns. The amount of the credit is reduced by $50 for each $1,000 of AGI over the applicable threshold amount. This phase-out is limited only on the temporary increased child tax credit of $1,000 or $1,600 and not to the $2,000 credit.

It is important to keep records of any deposits from the IRS to reconcile with your 2021 tax return. This includes stimulus funds received and advanced child care credits. 

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