Advance Child Tax Credit Payments Starting July 2021

23 Jun 2021 Advance Child Tax Credit Payments Starting July 2021

Advance Child Tax Credit Payments Starting July 2021

Important changes to the Child Tax Credit will help many families get advance payments of the credit starting this summer. The IRS will pay half the total credit amount in advance monthly payments beginning July 15. Qualifying taxpayers will claim the other half when they file their 2021 income tax return. These changes apply to tax year 2021 only.

The IRS uses information you provided earlier to determine if you qualify and automatically enrolls you for advance payments. You do not need to take any additional action to get advance payments. The following information details who qualifies and when these payments will arrive.

Expanded Child Tax Credit

• You will receive $3,600 per dependent under age 6 and $3,000 per dependent age 6-17.
• The credit starts to phase out if your modified AGI is over $75,000 on single returns, $112,500 on head-of-household returns, and $150,000 on joint returns. The credit reduces $50 for every $1,000 of modified AGI over the applicable threshold. This phaseout is limited to the $1,000 or $1,600 temporary increased credit for 2021, not the $2,000 credit. The original $2,000 credit will apply the same phaseouts from 2020 ($50 reduction for every $1,000 of modified AGI over $400,000 on a joint return, or over $200,000 on a single or head-of-household return).
• The full credit is now fully refundable.
• Still not sure if you qualify? Check your Eligibility with the IRS Advance Child Tax Credit Eligibility Assistant Online Tool.

Advance Child Tax Credit Payments

The IRS will send half of a family’s estimated 2021 child tax credit in six monthly payments from July to December 2021. The first round of payments will arrive on July 15, 2021. After that, payments will be issued on August 13, September 15, October 15, November 15, and December 15.

• You may opt out of the advance payments and take the full child credit on your 2021 tax return. You can do so through the IRS website Advance Child Tax Credit Portal.
• You will be able to update dependent information, mailing address, and bank information through the IRS website Advance Child Tax Credit Portal. The IRS hopes to have this feature available by the end of June.
• CTC Payments will be distributed by check or direct deposit.
• The payments that you receive are advance payments of the 2021 child tax credit, so they are not taxable. On your 2021 Form 1040, you will reconcile the monthly payments received from the IRS in 2021 with the child tax credit that you are entitled to. The IRS will mail out a notice by January 31, 2022 (Letter 6419), showing the total amount of payments made to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records.
• If the credit amount is less than the payments you received, you may or may not have to pay the excess back. Families with 2021 modified AGIs at or below $40,000 on a single return, $50,000 on a head-of-household return and $60,000 on a joint return won’t have to repay any credit overpayments. On the other hand, families with 2021 modified AGIs of at least $80,000 on a single return, $100,000 on a head-of-household return and $120,000 on a joint return will need to repay the entire amount of any overpayment when they file their 2021 tax return next year. And families with 2021 modified AGIs between these thresholds will need to repay a portion of the overpayment.

Opt Out Advice

Opting out of the monthly payments makes sense for some families. To stop advance payment, you must unenroll 3 days before the first Thursday of the next month. Learn more about unenrolling. Here are a few reasons to consider when it comes to opting out.

• Families that may owe the IRS in April may want to use the full credit to offset their tax bill.
• If your household circumstances or tax situation will change, opting out may be the easier way to go. Make sure to update your information in the portal if your address, bank information, or number of dependents is changing.
• Families with shared child custody may opt out to ensure the credit goes to the correct guardian.
• Taxpayers who will have a higher income for 2021 should opt out of the payments so they don’t have to pay them back come tax time.
• Families that lived or plan to live outside of the U.S. for more than half of 2021 should unenroll from the monthly payments, according to the IRS.

Letters from the IRS

If you receive a Child Tax Credit letter from the IRS it means the IRS thinks you could qualify. If a letter doesn’t arrive, don’t worry. The best way to check eligibility is the IRS website. There will also be a letter from the IRS in January recapping your payments. Please keep that letter for tax time.

Advance Child Tax Credit Eligibility Assistant

Advance Child Tax Credit Portal

2021 CTC Frequently Asked Questions

Sample IRS Letter 6416

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