Under the American Rescue Plan Act (ARPA) of 2021, the Child Tax Credit (CTC) was expanded to a fully refundable $3,000 per eligible child under 18 ($3,600 per child under 6). In addition, ARPA provides parents with Advance Child Tax Credit payments totaling 50% of the estimated amount of their 2021 Child Tax Credit.
The Advance Child Tax Credit payments are not based on, or related to, the $500 non-refundable Credit for Other Dependents who do not qualify for the Child Tax Credit.
For families who meet the income threshold and otherwise qualify, the increased, fully refundable 2021 CTC will provide an immediate benefit that is expected to reduce child poverty in the U.S. by 45%, according to the Center for Poverty and Social Policy at Columbia University. The question is: How do families go about obtaining and managing this tax credit including these advance payments?
First payments of the 2021 Advance Child Tax Credit started appearing in parents' bank accounts on July 15, 2021, and many parents will already have started receiving them. Here's what to do to check if your family is eligible, what you need to do to get them, and how much you are eligible to receive.
- Major changes to the Child Tax Credit for 2021 include a larger, fully refundable credit, and advance payments during the last half of 2021.
- Eligibility is based on the presence of one or more qualifying child dependents in your household and certain other criteria.
- The amount you receive is based on your modified adjusted gross income (MAGI).
- Most people will not need to take action to receive their advance payments, which will be disbursed in July, August, September, October, November, and December of 2021.
- To manage your account your must verify your identity with an ID.me account or other acceptable verification.
Find Out If You Are Eligible
First things first. Determine whether you are eligible to receive a Child Tax Credit and Advance Child Tax Credit payments in 2021. You are eligible if all of the following apply to you:
- You have a qualifying child defined as your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any one of these.
- You provide half of the qualifying child's support.
- The qualifying child lives with you for more than half of 2021.
- The qualifying child does not turn 18 before Jan. 1, 2022.
- You claim the qualifying child as your dependent on your taxes.
- The qualifying child is a U.S. citizen, U.S. national, or U.S. resident alien.
- You or your spouse, if married filing a joint return, have a main home in one of the 50 states or the District of Columbia for more than half the year.
Use the IRS Advance Child Tax Credit Eligibility Assistant to determine if you are eligible for Advance Child Tax Credit payments.
Your child tax credit amount can be reduced based on the amount of your 2021 modified adjusted gross income (MAGI).
Determine How Much You Are Eligible For
The amount of your 2021 Child Tax Credit is determined by your modified adjusted gross income (MAGI) and the amount, if any, by which it exceeds certain thresholds. The thresholds are:
- $150,000 if married and filing a joint return or if filing as a qualifying widow or widower.
- $112,500 if filing as head of household.
- $75,000 if you are a single filer or are married and filing a separate return.
Provided your MAGI does not exceed the relevant threshold above, your 2021 tax year Child Tax Credit for each qualifying child is:
- $3,600 for children ages 5 and under at the end of 2021.
- $3,000 for children ages 6 through 17 at the end of 2021.
The amounts above will be reduced by $50 for each $1,000 (or fraction thereof) that your MAGI exceeds the qualifying threshold above up to $400,000 if married and filing jointly or $200,000 for all other filing statuses.
The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds $400,000 if married and filing a joint return; or $200,000 for all other filing statuses.
Above these levels, your Child Tax Credit reduces by $50 for each $1,000 (or fraction thereof) until it phases out entirely.
You May Not Need to Do Anything
If you are eligible to receive Advance Child Tax Credit payments based on your 2020 or 2019 tax returns, you should receive your six payments automatically. If you entered information in the IRS Non-Filer tool for Economic Impact Payments (EIPs) in 2020, that should also register you with the IRS, requiring no further action on your part.
If Needed, File Your Taxes
If you haven't filed your 2019 or 2020 tax return, and you are required to, you should do that right away. Provide information about your bank account so you can receive your payments by direct deposit.
Use the IRS Non-Filer Tool
If you haven't filed and are not required to do so, use the IRS Non-Filer tool to file a simplified tax return that will allow you to register for advance Child Tax Credit payments.
Once the IRS determines your eligibility, it will calculate your Child Tax Credit amount and process your advance payments automatically. If you want to access your IRS accounts, stop advance payments, or change banking information, you must have an ID.me account .
Advance Child Tax Credit Payment Schedule
Once you are registered in the system, Advance Child Tax Credit payments will be disbursed as follows:
|Payment Month||Payment Date|
Source: Internal Revenue Service
How to Create an ID.me Account
An ID.me account provides a way for you to access your IRS information; register if you are a non-filer; and manage banking information, eligibility, or opt out of monthly payments if you prefer receiving one payment next year.
You do not need to create an ID.me account if you already have one from a state government or federal agency, or if you have an existing IRS account with a Secure Access username and password.
To create an ID.me account start at the Child Tax Credit Update Portal. From there:
- Click on the Manage Advance Payments button.
- Click on the button marked ID.me Create an account.
- Enter your email, create and confirm a password, accept the terms, and click on Create an ID.me account.
- Read about the ID.me then click Continue.
- ID.me will ask you to confirm your email then give you the option to set up multi-factor authentication (a good idea) for added security.
- You will be asked to upload a picture of your photo ID, then take and upload a selfie using your phone or computer camera.
- Next, you will enter your Social Security number, confirm additional information, and then click Continue.
- ID.me will send you a text message confirming that you want to set up an account. Click Allow and continue on the ID.me page to send verification to the IRS.
- If, for some reason, ID.me is not able to verify you, it will give you the option to have a video call with a "Trusted Referee."
- Otherwise, you can return to the Child Tax Credit Update Portal, log in, and manage your account.
Internal Revenue Service. "Here’s how the credit for other dependents can benefit taxpayers." Accessed July 19, 2021.
Center on Poverty and Social Policy at Columbia University. "A Poverty Reduction Analysis of the American Family Act," Page 1. Accessed July 19, 2021.
Internal Revenue Service. "2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit," Q B1, Q B2, Q B3. Accessed July 19, 2021.
Internal Revenue Service. "Advance Child Tax Credit Eligibility Assistant." Accessed July 19, 2021.
Internal Revenue Service. "2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic C: Calculation of the 2021 Child Tax Credit," Q C2. Accessed July 19, 2021.
Internal Revenue Service. "2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic C: Calculation of the 2021 Child Tax Credit," Q C3, Q C4, Q C5. Accessed July 19, 2021.
Internal Revenue Service. "2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic A: General Information," Q A2. Accessed July 19, 2021.
Internal Revenue Service. "2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic E: Advance Payment Process of the Child Tax Credit," Q E1. Accessed July 19, 2021.
Internal Revenue Service. "2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic K: Verifying Your Identity to Manage your Payment," Q K2. Accessed July 19, 2021.