The largest-ever child tax credit is coming to families in the US in the form of monthly payments.
The American Rescue Plan also increased the maximum child tax credit to $3,600 for children less than six years of age and $3,000 for children age 6-17. Eligible families will receive $300 a month for children under six and $250 a month for children 6-17.
Payments are scheduled to start in July.
Here’s what President Joe Biden had to say about the new program:
“This tax cut will give our nation’s hardworking families with children a little more breathing room when it comes to putting food on the table, paying the bills, and making ends meet. Nearly every working family with children is going to feel this tax cut make a difference in their lives, and we need to spread the word so that all eligible families get the full credit.”
Families that filed 2019 or 2020 tax returns or signed up for a stimulus check from the IRS will automatically receive the monthly payments. Those that received their stimulus check or tax refund through direct deposit will see the money deposited to their bank accounts on the 15th of each month until the end of 2021. Others will receive a check sent in the mail.
Families can also sign up at ChildTaxCredit.gov.
The payments are advances on the child tax credit eligible families would have received if they claim the tax credit on their 2021 tax return. The advances will total up to half the credit amounts since they start in July. The other half can be claimed when people file their returns.
Tax experts warn that if you don’t usually receive a refund when filing your taxes, you will lose half the deduction when you do file and it could mean paying more taxes than usual. For some families, that means they may be required to repay some or all of the credit to the IRS.
Some 36 million households are eligible for the payments as long as their adjusted gross income (AGI) is less than established thresholds.
- Single: AGI of $75,000 or less
- Head of Household: AGI of $112,500 or less
- Couple Filing Jointly: AGI of $150,000 or less
If you earn above these limits, you may still qualify for the tax credit, but the amount will be reduced by $50 for every $1,000 of income over the threshold, according to tax expert Joanna Powell as reported in CNet.
If you earn more than $240,000, you are ineligible for any tax credit for single filers. As head of household, you will still receive some payment if you earn up to $240,000 and couples filing jointly must have an income of less than $440,000.
Other eligibility rules include:
- A child must have lived with you at least six months
- You and your child must both be US citizens
- The child must have a social security number
- For married couples, at least one spouse must have a social security number or ITIN.
- If parents share custody, only one parent can receive the tax credit.