Child Tax Credit 2021: Payments, how much, dates and opting out
About 35 million U.S. families with 60 million children were sent the first monthly check for the Child Tax Credit on July 15. That federal benefit is providing about $15 billion in cash to families each month, but plenty of questions are arising about eligibility, the amount of the payments and whether families should opt out.
The Child Tax Credit (CTC) "has been in place for decades, but sending it out monthly and sending it out automatically is a new activity for the IRS," said Radha Seshagiri, director of public policy and systems change for the financial nonprofit SaverLife. "While many people are savvy, there are questions about eligibility and misconceptions about this brand-new program."
Some people might not be aware that they are eligible, with a recent SaverLife survey finding that almost a third of respondents had heard only a little or nothing about the CTC. Among the most likely to miss out on the assistance are low-income households that aren't required to file federal tax returns, possibly because many of these families didn't qualify for the credit prior to changes in the tax law through the American Rescue Plan.
That COVID-19 relief bill, signed into law by President Joe Biden in March, made the CTC fully refundable, which means that families who don't owe federal tax can get the credit either as a tax refund or a monthly cash payment. Prior to that change, some families who didn't owe taxes were unable to claim the benefit, making the program most of help to middle-income families.
There are plenty of other questions from parents, such as whether children born in 2021 are eligible and, in the case of divorced or never-married parents, which parent gets the payment. Read on to learn more.
Does my child qualify for a Child Tax Credit payment?
Children who are 17 or younger are generally eligible for the CTC payments, but there are conditions. Parents must have their main home in one of the 50 U.S. states or Washington, D.C., for more than six months of the year, according to the IRS.
A home can mean anything from a house to a shelter or temporary lodging, and it doesn't have to be the same physical location or a permanent address.
That means homeless people with children qualify for the tax credit. People who are temporarily away from their main home due to military service, work, vacation, education or illness are typically treated as living in their main home within the U.S., the IRS says.
Another eligibility issue relates to income. To get the full enhanced CTC — which amounts to $3,600 for children under 6 years old and $3,000 for kids ages 6 to 17 years old — single taxpayers must earn less than $75,000 and joint filers must earn less than $150,000. Payments are reduced by $50 for every $1,000 of income above those limits.
The enhanced payments phase out for single taxpayers earning $95,000 and joint filers earning $170,000 — but most households earning above those limits will still qualify for the regular $2,000 per-child CTC.
That $2,000 tax credit is available to single taxpayers earning less than $200,000 and married couples earning less than $400,000, although the tax credit starts to phase out for taxpayers who earn over those limits, according to the Tax Policy Center.
How much does the Child Tax Credit provide per child ?
That depends on two issues: your child's age and your income. Children under 6 years old qualify for the full enhanced Child Tax Credit of $3,600 if their single-filer parent earns less than $75,000 or their joint-filing parents earn less than $150,000.
Families that meet those conditions will receive half of the $3,600 paid out over six monthly checks, or $300 per month from July through December.
Children 6 to 17 years old qualify for the full enhanced CTC of $3,000 if their parents' income falls below the income thresholds mentioned above. Again, they will receive half of that credit paid out over six months, or $250 per month from July through December.
Families that earn above those amounts will see their CTC payments decline by $50 for every $1,000 of income above those limits, with the enhanced payments ending at $95,000 for single filers and joint filers earning more than $170,000.
But families above the threshold for the enhanced payments will still get the regular CTC of $2,000 per child. That means they'll receive $167 per child who is 17 or younger through December, representing half of the $2,000 regular CTC. (A CTC calculator from Omni Calculator lets users check how much they'll get.)
Is the Child Tax Credit for 2020 or 2021?
The monthly payments are advances on 50% of the CTC that you can claim on your 2021 tax returns when you file your taxes in early 2022. In other words, the CTC is a tax credit for 2021.
But because the IRS is providing an advance on the tax credit — the agency won't begin accepting 2021 tax returns until early next year — the IRS is relying on your 2020 or 2019 tax return to determine eligibility.
Am I eligible if I don't file taxes?
Yes, as long as you and your children meet the eligibility requirements listed above.
"Even if you don't have to file a tax return, you are eligible," Seshagiri said.
A recent survey from her group found that almost 4 of 5 non-filers have heard some, little or nothing about the CTC. That could prove a barrier to receiving the payments because the IRS does need information from non-filers in order to process the advance payments.
Non-filers should visit the Child Tax Credit Non-filers tool at the IRS to file a simplified tax return, which in turn will register them for the CTC payments as well as the third stimulus check, if they haven't received that yet.
Is my child born in 2021 eligible for the CTC?
Yes, because the enhanced Child Tax Credit is a tax benefit for 2021. The monthly checks are an advance on that tax credit.
But because the IRS is using 2020 or 2019 tax returns to determine eligibility, the tax agency won't know about children born in 2021.
The IRS said it will update its Child Tax Credit Update Portal later this year to allow parents to register children born or adopted in 2021. If parents don't do this, they will be able to claim the entire $3,600 tax credit when they file their taxes in early 2022.
How does the CTC work for divorced parents?
Parents who file their taxes jointly can share the CTC payments because they effectively file the return as a single entity. But that is not the case for parents who file tax separately, such as in the case of divorced parents. Only one parent can claim the Child Tax Credit, according to the IRS.
Often, divorced parents will swap years when they claim their child or children as dependents. But this can be an issue with the CTC since the IRS is relying on 2019 or 2020 tax returns to send out the advance payments of a 2021 tax credit. That means one parent could end up with the tax credit for two years in a row.
The Child Tax Credit Update Portal allows parents to opt out of the CTC, which could be useful for divorced parents to avoid such an issue. For instance, if one parent claimed the child as a dependent in 2020 and the other parent plans to claim the child in 2021, the first parent would want to opt out of the CTC now to avoid claiming the credit for two consecutive years.
Could I have to repay the CTC?
It's possible if your income changes in 2021 so that you aren't eligible for as much of the payment. For instance, if your income increases in 2021 above the thresholds for the full expanded tax credit, you might be on the hook for repaying the IRS for that overpayment next year when the tax agency reconciles your CTC payments with your reported income for 2021.
In that case, taxpayers may want to opt out of the CTC. To do that, go to the Child Tax Credit Update Portal to unenroll from the monthly payments.
How do I unenroll from the CTC?
The IRS says the monthly payments will be disbursed on these dates:
- July 15
- August 13
- September 15
- October 15
- November 15
- December 15
To unenroll or enroll for payments, people must go to the Child Tax Credit Update Portal to unenroll by these dates:
- By August 2 for the August payment
- August 30 for the September payment
- October 4 for the October payment
- November 1 for the November payment
- November 29 for the December payment