Child Tax Credit Under the American Rescue Plan Expansion

Child Tax Credit Details

  • Credit amount increased – from $2,000 to $3,600 for children under age 6, and $3,000 for children 6-17 years old (previously credit was only given up to age 16).
  • Credit amount will be made through advance payments in 2021, starting in July, to allow struggling families the benefit of the financial assistance now, instead of waiting until 2022.
  • Credit is now fully refundable, so households will be entitled to receive the full credit benefit. A tax credit means a tax bill is reduced dollar-for-dollar, and it being refundable means a tax bill can be reduced to $0 and a refund can be issued for anything left over.
  • The credit begins to phase out when adjusted gross income reaches $75,000 for single filers or $150,000 for joint filers ($112,500 for Head of Household).
  • There is no requirement to be employed or have earnings in order to claim the child credit ~ the $2500 in earned income floor was removed.

Other Eligibility Requirements

  • Child must be a US citizen, national or resident alien and have a social security number.
  • Child must be claimed as a dependent on 2021 taxes, must be related to the filer, and live with the filer for at least six months during the year.

How Payments Are Issued

  • Households get six monthly payments (15th of the month) via direct deposit starting in July (80% of those who qualify have direct deposit, the rest will receive a check), if a household qualifies for $3,000, they get $250 in monthly payments from July-December, and then claim the other $1500 on taxes.
  • Advance payments are not taxable.
  • Households choosing to claim 100% on 2021 taxes, must opt out of the periodic payment program (an online portal is being established).
  • Income changes, marital status and number of qualifying children (born in 2021) can be reported in the online portal being established. Child’s name, DOB and SSN are required to claim a child.
  • There will be a second online portal for families who do not traditionally file a tax return because their income is below filing thresholds.
  • No tax offset for past due federal/state taxes, or for those behind on their child support payments.