The IRS recently announced the first monthly payment of the expanded and newly-advanceable child tax credit (CTC) from the American Rescue Plan will be made on July 15. Roughly 39 million households — covering 88% of children in the United States — are slated to begin receiving monthly payments without any further action required. This means a majority of your clients with children will receive payments.
The increased CTC payments will be made on the 15th of each month unless the 15th falls on a weekend or holiday. Families who receive the credit by direct deposit can plan their budgets around receipt of the benefit. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.
- The payments will be dispersed July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the CTC. Advance payments will be estimated using information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet). Most taxpayers will not be required to take any action to receive their payments.
The American Rescue Plan Act increased the maximum child tax credit in 2021 to $3,600 for children under the age of 6 and to $3,000 per child for children between ages 6 and 17. The American Rescue Plan is projected to lift more than five million children out of poverty this year, cutting child poverty by more than half.
Eligible taxpayers who do not want to receive advance payment of the 2021 CTC will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon at IRS.gov/childtaxcredit2021. NATP will follow this news and provide updates as they come in.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.