By Tessa Bradshaw
Over 39 million Americans began receiving the first monthly payment of the 2021 Child Tax Credit on July 15. The tax credit will help more than 60 million children, according to the White House.
The Child Tax Credit was a part of the American Rescue Plan of 2021 that President Joe Biden signed in March, sometimes referred to as the COVID-19 Stimulus Package. The $1.9 trillion plan that was passed by Congress set aside an estimated $110 billion for the Child Tax Credit. About $15 billion alone will be used for the first round of payments.
Families who are eligible will receive an automatic direct deposit to their account if the IRS has billing information on file. If not, the IRS will mail a check to the address on file. Payments will be distributed on the 15th of every month, except August which will be distributed on the 13th due to it being on the weekend. Monthly payments will be given until December. Once taxes are filed, the rest of the amount will be fully distributed.
Not all families can qualify for the Child Tax Credit due to income, age of child or citizenship status.
Based on income, a two-parent household who filed joint taxes can qualify if they earn less than $150,000 together. If a parent files as head of household, they can qualify if they earn less than $112,500. And finally, a single parent can qualify if they earn less than $75,000.
The ages of children also determine how much is given to a qualified family. Children under the age of 6 can receive $300 a month and a child under 18 can receive $250. But the child’s age depends on how old they will be on Dec. 31 of this year due to that being the last day for the Child Tax Credit to be available.
Another qualification for the Child Tax Credit is that the children and parents must be U.S. citizens and the child must have a valid Social Security number. Adopted children also qualify if they are a U.S. citizen.
If households do not want to have monthly payments they can defer the payments until 2022 when they file taxes. This would be a one-time payment of $3,600 per child under 6 and $3,000 per child under 18.
To change from monthly payments to a one-time payment visit https://www.irs.gov/credits-deductions/child-tax-credit-update-portal for more information on how to switch.
Children born in 2021 can qualify for the Child Tax Credit. If a child born in the first half of the year has been reported to the IRS, no action is needed. If a child is born from July on, the parent will need to report their child to the IRS. Once the child is verified, monthly payments will be given for the remaining months and the rest will be given in the beginning of 2022 when taxes are filed.
Full time college students who are 18-24 and have been claimed as dependents by their parents may also qualify for a one-time payment of $500 when taxes are filed in 2022.
Households who qualified and filed their 2020 taxes before the May 17 deadline are automatically set up for payments and no further action is required. Even those who did not file a 2020 tax return can also receive payments. The Child Tax Credit Non-Filer Sign-Up Tool on the IRS website will determine a family’s eligibility to receive money.
Many people are deferring monthly payments due to the possibility of having to repay the IRS when they file taxes next year. This is due to the IRS giving more money based on outdated information in their data systems. If the IRS sends out too much money once taxes are filled in 2022, it will cause some people to owe money if income, filing status or the number of dependents someone is caring for changes.
The Shank family, who lives in Jackson County, are deferring their monthly payments for a one time payment once they file taxes next year.
The reason why they are deferring is because they were advised that taking monthly payments would cause negative impacts for them next year, said Andrew Shank who is married to Trish Shank and are parents to three girls.
“Honestly, we just haven’t put much thought into it,” Shank said. “It’ll be nice to have, but I don’t know that it’ll make a huge difference in our day-to-day. Most likely, whenever we receive the benefit on this year’s taxes, it’ll just go into our savings account.”
To learn more information about the payments, eligibility and deferring options visit https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.
Tessa Bradshaw is an intern at The Sylva Herald.