In mid-July, millions of American families received the first of six-monthly payments of up to $300 per child from the federal government thanks to an expanded child tax credit.
The payments are a partial advance of a credit that would normally be claimed on next year’s tax return. But to help families pay bills now, half of the credit will be dispensed early in monthly payments over the second half of this year.
Most eligible families — which total over 39 million households with 65 million children — don’t have to do anything to get these early payments, reports the Internal Revenue Service. The payments will be automatically deposited into eligible recipients’ bank accounts or mailed as checks.
Congress approved the expanded 2021 child tax credit as part of the Biden administration’s economic relief legislation. The size of the credit depends on a family’s income, the number of children and their ages. For now, it applies to 2021 only, although President Biden and some members of Congress have said they hope to extend it for future years.
The monthly payments cover half of a family’s estimated child credit; the other half will be paid next year when the family files its tax return.
Who is eligible for the credit?
You can get the full credit if your income is under $75,000 for single filers, $150,000 for married couples filing a joint tax return and $112,500 for “head of household” filers — typically, unmarried single parents. The credit begins to shrink above those thresholds and drops to zero at higher incomes - $240,000 for unmarried taxpayers and $440,000 for married couples.
How much is the credit for tax year 2021?
The total credit is up to $3,600 for each child under age 6 and up to $3,000 for each child ages 6 to 17. Monthly payments will be $250 for older children and $300 for those under age 6. Previously, the child tax credit offered a maximum of $2,000 per child and wasn’t available for 17-year-olds.
This year, the entire credit is fully “refundable,” meaning that eligible families can get it even if they don’t have earned income or owe no federal income tax. Previously, the refundable portion of the credit was limited to $1,400 per child.
If you have questions about how this program impacts you, you should talk with a tax advisor. Connect with a Farm Bureau financial advisor about how you can use these extra funds to improve your child’s future.
Neither the Company nor its agents or advisors give tax, accounting or legal advice. Consult your professional advisor in these areas.