The government launched new portals to help simplify the process:
The expanded child tax credit increases the $2,000 annual credit a parent would receive to up to $3,600 per child. Half of that credit is split into six monthly payments and will be distributed through December 2021, while the rest can be claimed on 2021's annual tax return when you file your taxes in 2022.
The American Rescue Plan raised the maximum Child Tax Credit in 2021 to $3,600 for qualifying children under the age of 6 and to $3,000 per child for qualifying children between ages 6 and 17. Before 2021, the credit was worth up to $2,000 per eligible child, and 17 year-olds were not considered as qualifying children for the credit.
The new maximum credit is available to taxpayers with a modified adjusted gross income (AGI) of:
- $75,000 or less for single filers;
- $112,500 or less for head of households; and
- $150,000 or less for married couples filing a joint return and qualified widows and widowers.
For most people, modified AGI is the amount shown on Line 11 of their 2020 Form 1040 or 1040-SR. Above these income thresholds, the extra amount above the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every extra $1,000 in modified AGI.
To qualify for advance Child Tax Credit payments, you — and your spouse, if you filed a joint return — must have:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
- Given the IRS your information in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool; and
- A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
- Made less than certain income limits.
Many of the people we have spoken to have the misunderstanding that they are receiving these monthly payments AND a full child tax credit refund next year when they file their 2021 tax returns. This is not the case. This is an ADVANCE.
We're urging clients to OPT-OUT of the advance tax credit because many families rely on this credit to offset their balance due on their tax returns.
CBS News Business Analyst Jill Schlesinger suggests people to opt-out "that way, next tax season, if you do qualify, you can get that full credit"..."it's better not to get the money this year because if you do get it and you don't qualify, you have to pay back that money to Uncle Sam."
