Part of the American Rescue Plan introduces an expanded Child Tax Credit. Not only is it increasing the overall amount per child you will receive in 2021, but it’s also shaking up the method in which you will receive it. This will be a blessing for some people, and for others, they may want to opt out of the monthly distributions!
How Much Will I Receive?
Below are the age ranges and total amounts per child you will receive in 2021 (reference the distribution methods below on how to expect the payments):
Ages 5 and younger – up to $3,600
Ages 6 to 17 – Up to $3,000
Age 18 – $500 one-time check
Ages 19 to 24, full-time college students – $500 one-time check
The phase out amounts are the same as the last stimulus payment. Starting at $75,000 per year for singles ($150,000 for married filing jointly) total payment amounts will be reduced by $50 for every $1,000 over those threshold amounts. The IRS will be using the last year you filed a tax return for to determine these numbers.
Distribution Methods
For people with children 17 and younger you will begin to receive monthly payments on July 1st that will continue through the end of 2021. Half of your overall tax credit will be split up over the 6 months ($300 per child per month for ages 5 and younger, $250 per child per month for ages 6-17) and the other half will be included with your 2021 tax refund that you will file in 2022.
Why You May Want to opt Out
There are a couple of reasons that you may want to opt out of receiving the monthly payments here in 2021:
You would prefer to receive the credit as a whole with your tax refund in 2022
If your income rises above the income threshold this year you would be responsible to pay back the amount you have received over the 6 months (or have your refund reduced)
You haven’t filed your 2020 return yet and your 2019 income is significantly different than 2020 and/or 2021
The IRS will be opening a portal by July 1st that will allow you to opt out of the payments if you choose to, along with the option to update your information if your circumstances have changed since your last filed return. For example, if you have a child in 2021, the IRS wouldn’t have that information on file yet, so updating your information may help you get a larger payout. We will keep you updated with any new information as it comes out, along with the information to login to the IRS portal when it is available!
Comments