Starting in July, many parents are expected to get a financial boost in the form of direct monthly payments to support the cost of raising children. As part of the most recent stimulus bill passed in March, Congress raised the 2020 limits from up to $2,000 per child to a maximum of $3,600. However, that does not mean all parents receive that amount. Here’s what you need to know.
Children born in 2021 make you eligible for the full 2021 tax credit of $3,600 per child. Qualified children under age 5 also count for the full amount of $3,600, but children between 6 and 17 years old only count for $3,000 maximum per child. And young adults between 18 and 24 only bring parents a one-time $500 payment. If your child ages up into the next payment bracket this year (i.e., turns 6, 17, or 25), they would follow the rules of the older age bracket.
If your adjusted gross income (AGI) is less than or equal to $75,000 as a single filer, $112,500 as a head of household or $150,000 filing jointly, you'll receive the full amount. For incomes higher than $150,000, your child tax credit payments will begin to phase out by $50 for every $1,000 of income over the threshold. Additionally, divorced parents who share custody have a specific set of rules unique to their situation; click here to learn more if this applies to you.
In July, the first of seven child tax credit payments will be sent to parents of qualified dependents. The first half of the payments will be delivered between July to December of this year, with the rest being sent out the following year. However, if you'd rather receive your 2021 child tax credit money as one large payment, you do have the option of opting out of monthly payments once the IRS opens the online portal (anticipated for July 1) to help you make that decision and input other information, such as if your AGI changes. If your AGI goes up but you wait until 2022 to update your information while continuing to receive the full amount based on your lower income, you would either have to return the excess money on your 2021 tax return, accept a smaller 2021 refund, or owe more in taxes.
If you have any questions about the child tax credit payments or any other topic, please do not hesitate to contact us. We look forward to hearing from you.