Child Tax Credit Changes
We all are still seeing the looming effects of Covid19 pandemic on our economy. Some help is on the way through the avenue of the advance child tax credit payments authorized by the American Rescue Plan Act. The Act made some important changes to the child tax credit:
- it increased the maximum credit allowed from $2000 to $3,600 for children ages 5 and under at the end of 2021 and $3,000 for children ages 6 through 17 at the end of 2021.
- the credit will now be fully refundable, which means, you can get the amount of credit as a refund even if you do not owe any income taxes.
Child Tax Credit Advance Payments Starting July 15th
One other change that came about is that now you don’t have to wait until 2021 tax filing to claim some of the child tax credit available to you. Half of it is now available in form of advance monthly payments. The IRS will start making these payments on July 15th 2021.
But there are some requirements to qualify for these advances. To see if you are eligible, please click here.
You do not have to do anything to enroll in this monthly payment, however if do not wish to receive the advance child tax credit payments, you need to opt out. Some of the reasons for wanting to opt out of the advance child tax credit payments, can be:
- you expect to owe taxes on your 2021 tax return,
- you want to save the credit amount for some considerable expenses you foresee for next year,
- maybe due to a divorce, you expect to have a lower number of dependents.
The unenrolling is a one time action. You do not have to unenroll for each month, neither can you reenroll back to receive the advance payments. It is an individual action, hence you and your spouse, if filing jointly, both have an independent right to decide and enroll or unenroll individually. If your spouse unenrolls and you do not, you will get half of the joint payment you were supposed to receive with your spouse.
You can find more information about the advance child tax credit payments on the IRS website.
If you need help with your taxes, give us a call or schedule an appointment.
This material is for informational purposes only. It does not constitute tax, legal or accounting advice.