The new child tax credit payment will be coming in July.
The payment was created to help millions of families who have been financially affected by the pandemic.
The new child tax credit is part of the American Rescue Plan which passed in March. It increases the credit from $2,000 to a maximum of $3,600 for younger children and $3,000 for older ones, for the 2021 tax year.
Normally parents must wait until they file their income tax return to receive the child tax credit. However, parents will now be able to get money throughout the remainder of the year.
About 39 million families will be eligible for monthly payments of up to $300. The newly expanded child tax credit payment will start in July 15 and will continue through December. The payments that represent the first half of the year will be made later in a lump sum.
Eligible families will qualify for up to $300 per month for each child under 6 years old and up to $250 for each child between the ages of 6 and 17. The credit ends in the year a child turns 18.
The amount of the payment could be smaller depending on the parents’ income.
Married parents filing joint returns and qualifying widowers will receive the full payment if their incomes are under $150,000. The amount will be reduced for couples with higher incomes. If you file your return as head of household and makeup $112,500 you will receive the full amount. If you are filing status is single, you can make up to $75,000 before the payment is reduced.
The IRS will determine the amount of your payment based on your 2020 tax return. However, the 2019 tax return will be used to determine the amount of the qualified payment if the 2020 tax return is not processed in time.
The IRS is urging people to file their returns to ensure that they are eligible for the appropriate payment amount.
The payments will automatically be deposited into your bank account that is on file with the IRS.
You can decline the checks if you don’t want the advance payment and would prefer the full tax credit when you file your tax return.
This boost is currently only temporary. However, President Biden is encouraging Congress to make the expanded child tax credit permanent.
David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at firstname.lastname@example.org