Monthly child tax credit advance payments to eligible parents start in two weeks on July 15. The installments are part of the American Rescue Plan COVID relief bill signed in March.
This child tax credit is not new. Eligible parents already receive $2,000 from the government for each qualifying child when they get their tax refund in the spring. The change is that the amount has increased and there will be the ability to receive up to half of the money -- upfront -- in the form of monthly payments in the second half of this year. The monthly payments will be an advance on the money parents would get when they file their taxes in 2022.
But, parents will be allowed to opt-out of the advance payments and take it all at tax time.
Here are some commonly asked questions about the child tax credit and how to manage it.
Who is eligible for the child tax credit?
About 39 million households will be eligible for the monthly child tax credit, which the IRS says covers about 88% of children in the U.S.
Married taxpayers who made less than $150,000 in 2020 and who filed jointly will receive the full amount, as will qualifying widows and widowers. The full amount will also go to heads of households who made up to $112,500 and individuals who made up to $75,000. The amount will be phased out after that.
How much is the child tax credit?
It's $3,600 for each child under age 6. That breaks down to $300 per month. For children ages 6-17, it's $3,000 or $250 per month. Children who turn 17 in 2021 are among those who qualify.
The payments will go to those with these adjustable gross incomes:
- $75,000 or less for singles
- $112,500 or less for heads of household
- $150,000 or less for married couples filing a joint return and qualified widows and widowers
When do child tax credit payments start?
Thursday, July 15 is when the monthly payments begin.
Because this is starting in the middle of the year, only half the money will come via monthly payments. The rest will come after taxes as part of the refund next spring or will be deducted if the taxpayer owes the IRS.
When will the monthly child tax credit payment arrive?
They will continue through December on the following dates:
- Friday, August 13
- Wednesday, September 15
- Friday, October 15
- Monday, November 15
- Wednesday, December 15
Do I have to take the monthly child tax credit payment?
It's too late to opt out of the July 15 payment, but you can still unenroll from the remaining monthly payments and just take all that money at tax time next year.
The IRS has launched the Child Tax Credit Update Portal to allow families to check if they are enrolled to get the payments, unenroll to stop getting the payments and provide or update bank account information for direct deposit.
Families have until August 2 to change their status and choose to not get the monthly payments for the remainder of 2021.
"To access the Child Tax Credit Update Portal, a person must first verify their identity," the IRS said. "If a person has an existing IRS username or an ID.me account with a verified identity, they can use those accounts to easily sign in. People without an existing account will be asked to verify their identity with a form of photo identification using ID.me, a trusted third party for the IRS."
Is it better to take the monthly child tax credit or the lump sum?
It depends on your financial situation. One reason there was a push for the monthly payment was to help cut childhood poverty. Parents who have a lower income and are struggling could use the money immediately on food, diapers, clothing, child care or whatever is needed at the moment.
If you're someone who doesn't need the money immediately, or who anticipates possibly having to pay taxes to the IRS in the spring, you could opt-out and know that the full amount will be available at tax time.
Another reason to consider opting out is if your income increases this year to a level where you no longer qualify for the credit. If that happens but you have taken the advance payment, you may then be required to pay it back at tax time.
Then there is the unknown. Will Congress pass any new tax laws that might affect how much you expect to get next year when filing taxes? It happened right in the middle of tax season this year when $10,200 in unemployment benefits from 2020 were made tax-free by the American Rescue Plan -- a month after people had already started filing.
Can I get the child tax credit if I don't normally file income taxes?
Yes. The IRS has updated the Non-filer Sign-up tool used for the COVID-19 stimulus payments so that eligible Americans who normally don't have to file a tax return – mainly those with lower incomes, those who are homeless or other underserved groups – can sign up.
Is anyone besides the IRS offering the child tax credit?
No, and the IRS is clear -- any other option other than what it is distributing is a scam. The only way to get the monthly child tax credit payment is by filing a tax return or using the Non-filer tool.
"Watch out for scams using email, phone calls or texts related to the payments," the IRS said. "Be careful and cautious: The IRS never sends unsolicited electronic communications asking anyone to open attachments or visit a non-governmental website."
Will the monthly child tax credit continue in 2022?
The increased and monthly child tax credit from the American Rescue Plan is only good for 2021 and is not set to continue in 2022. But in President Joe Biden's American Families Plan, he is proposing extending it to 2025. Some members of Congress have called to make it permanent.