Extra income during the summer after a ravaging pandemic would be welcome relief for many families. Thankfully, that relief will become reality very soon!
Starting on July 15, the IRS will begin distributing monthly payments of the expanded child tax credit. For each child under the age of 6, families will receive $3,600, and for each child between 6 and 17, families will receive $3,000. The typical child tax credit is a $2,000 credit filed on yearly tax returns for each child in a household. Under the American Families Act, the amount of the credit increases per child and gives families the opportunity to receive half of their yearly credit in advanced payments between July and December. Â
Eligibility for Expanded Credit
The IRS will determine who receives the expanded tax credit using families’ most recent tax information—either 2019 or 2020. Here are the eligibility qualifications based on adjusted gross income and filing status:
Single:
- Less than $75,000: ELIGIBLE for increase
- $75,000-$200,000: ELIGIBLE for standard credit
Head of Household:
- Less than $112,500: ELIGIBLE for increase
Joint:
- Less than $150,000: ELIGIBLE for increase
- $150,000-$400,00: ELIGIBLE for standard credit
- Credit will reduce by $50 for every $1,000 above $150,000, up to $170,000
There’s no limit on the number of children a family can claim as long as the children are reflected on the latest tax information. Families that are ineligible for the expanded child tax credit may still qualify for the standard credit of up to $2,000 per child, but they will not receive advance payments.Â
Source: Social Squares
How Much Could My Family Get?
If you’re eligible for the expanded credit, calculating how much you should receive is pretty easy. Add $3,600 for each of your children under the age of 6, and add $3,000 for each of your children between the ages of 6 and 17.
EXAMPLE: Three children – 4, 7, 12
4-year-old: $3,600
7-year-old: $3,000
12-year-old: $3,000
TOTAL CREDIT: $9,600
Now that you have your total credit amount, divide that by two. The IRS is splitting the amount evenly, distributing half of the credit in six monthly payments and the other half with 2021 tax returns.
EXAMPLE:
TOTAL CREDIT: $9,600
Half of credit: $4,800
Monthly payments: $800
Again, you would receive the remaining $4,800 once you file 2021 taxes. Families who choose not to receive monthly payments would receive the full tax credit with their 2021 tax return.
Accessing the Payout Portal
There aren’t many details yet, but the IRS announced that families will have access to an online portal where they can opt out of the monthly payments and add updated income information. The deadline to file 2020 taxes was almost one month ago, but if you still need to file, the IRS highly recommends getting on that ASAP. If you’ve filed your 2020 taxes, but there has been a significant change to your income or your number of dependents has changed, be sure to access the portal once it becomes available so you can share documentation that reflects your life changes.
While the expanded credit is only authorized for 2021, there has been significant support for extending it through at least 2025. In the meantime, families can prepare for the increase by calculating their credit amount and deciding whether or not to opt out of monthly payments.
