2023 Update: the expanded Child Tax Credit in 2021 that was part of the American Rescue Plan legislation passed by Democrats in Congress and signed by President Biden was not extended into the 2022 or 2023 tax years. As a result, the Child Tax Credit reverts to 2020 levels and rules, with some slight modifications. The Tax Credit Portal detailed below is no longer active.
A number of new IRS tools are now live for the new expanded Child Tax Credit. The tools will allow American parents to check their eligibility for the advance tax credit payments, provide the ability for non tax-filers to register to receive the credit, provide the ability to unenroll or opt out from receiving advance payments, and make other tax credit status changes. The rest of this article will give a breakdown of what you should know about the Child Tax Credit portal and other credit tools before payments start going out on July 15.
Advance Child Tax Credit Tools:
The 3 new Child Tax Credit tools now available for use are:
- Child Tax Credit portal: use your 2020 (or 2019 if you have not yet filed taxes for 2020) income information to check Advance Child Tax Credit eligibility.
- Child Tax Credit Update Portal: allows parents to verify eligibility for advance monthly payments and optionally unenroll, or opt out from receiving them. Eligible recipients who unenroll from advance payments will receive a lump sum when they file their 2021 tax return. Additional capabilities, such as changing payment method, will also be added soon.
- Non-Filer Child Tax Credit Tool: allows eligible families who do not normally file a tax return (e.g. below minimum income level requirements for filing taxes) to register for the monthly Advance Child Tax Credit payments.
Expanded Child Tax Credit Details Summary
As a recap, the expanded Child Tax Credit hasn’t received much press, but it is a potential game changer for millions of families, with some estimating that it could cut childhood poverty in half by adding a significant increase to the standard Child Tax Credit that many Americans are familiar with, and sending half of funds monthly, in advance of 2021 tax year filing, for the final 6 months of 2021.
The 6 monthly Child Tax Credit payment amounts will total:
- $300: for children under age 6
- $250: for children age 6 through 17
The total advanced credit amount delivered in 2021 (over 6 months) will be:
- $1,800: for children under age 6
- $1,500: for children age 6 through 17
This will be half of the total amount paid out, with the other half being factored into 2021 tax returns. In total, the amount of the credit will equal:
- $3,600: for children under age 6
- $3,000: for children age 6 through 17
The Child Tax Credit is now fully refundable in 2021, which means you get the credit even if owe zero in taxes for the year, and there is no earned income requirement.
Advance payments will begin being paid out as advanced monthly payments starting July 15 to eligible households. Payments will be made on the 15th of each month (unless the 15th falls on a weekend or holiday) throughout the rest of 2021 – 6 payments in total. Payments will be in the form of direct deposit, check, or debit cards (likely tied to how you’ve elected to receive tax refunds or other benefits from the feds in the past).
Do I Need to Register for the Advance Child Tax Credit?
Those who meet Child Tax Credit eligibility who have filed their 2020 tax return (or, 2019 if 2020 is not yet filed) should not need to register to receive the advance payments. Those who have not filed a tax return recently should register. If in doubt, I’d suggest using the tools highlighted above to view eligibility, register, and make any needed changes.
Who Is Eligible for the Advance Child Tax Credit?
There are a number of criteria, but generally those with a child age 17 or under (previously 16 and under), who are below certain income levels are eligible for the Child Tax Credit. Phaseouts for the increased credit amounts begin at an AGI of:
- $75,000 for Individuals
- $112,500 for Head of Household
- $150,000 for Married Filing Jointly
The income phaseouts reduce the expanded portion of the credit by $50 for each additional $1,000 in income.
Who Should Opt Out of Receiving Advance Child Tax Credit Payments?
The advance Child Tax Credit payments take away from the amount of tax credit you would have received at the time of tax filing. Given that many families are still overcoming the financial stress of the pandemic, it could be useful to receive the payments ASAP. The biggest reason I can think of for why one might want to opt out of receiving the payments in 2021 is if they are expecting to owe money on their 2021 tax return and do not expect that they will be able to pay the extra $1,500 or $1,800 in taxes due, per child, during tax filing.
A few other opt-out scenarios may include:
- Expected income increase: e.g. income increase would result in no longer being eligible, or decrease in income that would result in newly being eligible for the credit. Remember, the credit may be issued off of 2020 income level, but when it comes time to do your tax return, it is based on 2021 income levels.
- Family status change: e.g. death of child, divorce, custody change