You may qualify for the Advance Child Tax Credit payments that congress approved based on your 2019 or 2020 tax return data. The IRS has sent out letters to those that have been identified as possible recipients of these new Advance Child Tax Credit payments. Below is information about the 2021 Child Tax Credit and Advanced Child Tax Credit payments and how they can affect your next years taxes if you decide to receive or opt-out.
What is the Child Tax Credit?
- Age matters. The old credit was for children under the age of 17. The new credit goes through age 17 and includes an increased credit for children under the age of 6.
- The new credit amount. The child tax credit goes from $2,000 per qualifying child up to $3,000 per child. The amount increases to $3,600 per child if your child is under the age of six.
- Fully refundable. You will get the child tax credit even if you do not owe tax. The old rules required $2,500 in minimum earnings and only up to $1,400 of the credit was refundable.
- Phaseouts just got a lot more complicated. As with the past child tax credit, you can only receive the credit if your income is below a threshold amount. The $200,000 threshold for unmarried taxpayers and $400,000 threshold for married taxpayers is still in place for the first $2,000 of the 2021 credit. To get the entire $3,000 or $3,600 credit in 2021, your adjusted gross income must be under $75,000 for single taxpayers, $112,500 for head of household taxpayers, and $150,000 for married taxpayers.
- New periodic payments. The new child tax credit also allows you to receive advanced monthly payments for 50 percent of the credit from July 2021 through December 2021. There is a new IRS website to unenroll/opt out of receiving monthly payments if you prefer to receive your entire child tax credit when you file your 2021 tax return in 2022. A portal is open for non-filers to enter their information to receive the credit as well. Portal links are below.
Update Portal/Unenrolling from Advance Payments
The Child Tax Credit Update Portal is password protected and available to anyone with internet access and a computer or smart phone. Updates to the tool are expected this summer and fall, which will allow you to view payment history, update bank details and other information like mailing addresses. A Spanish version of the tool is also being planned.
Half the total credit amount will be paid in advance monthly payments and you will claim the other half when you file your 2021 income tax return in 2022. The advance child tax credit payments are based on 2020 Adjust Gross Income (AGI). If you prefer not to receive the advanced payments, then you must opt-out. If you opt-out, then you will be able to collect all of the tax credit at one time which will give you a bigger refund or lower your tax liability.
Reasons you may opt to unenroll:
- To collect all of the credit at tax time to receive bigger refund
- Use credit to offset a tax bill/balance due
- Income for 2021 no longer qualifies for the child tax credit. **If you accept the payments, they will have to be paid back.
- Separated parents that share custody of dependents on alternating years. **If the parent who claimed dependents in 2020 (or 2019) isn’t the one who will claim them in 2021, they can unenroll to ensure the credit goes to the correct guardian.
- Families that lived or plan to live outside the U.S. for more than half of 2021
To unenroll, you must have an IRS account/username. If you don’t have an existing IRS username or ID.me account, have your photo identification ready.
**If you are married and file jointly, you both will have to unenroll/opt out from receiving the payments or the IRS will still send half of the payment if the other spouse doesn’t opt out.
Non-filer Sign-up tool
- You’re required to file a tax return.
- You have already filed a 2020 federal income tax return.
- Your 2020 gross income exceeded $12,400 ($24,800 for a married couple).
- You were married at the end of 2020 but will not include your spouse’s information when using this tool.
- Your main home is not in the United States.
- You’re requesting advance Child Tax Credit and you do not have a qualifying child who was born before 2021 and who had a Social Security number issued by May 17, 2021.
Advance Child Tax Credit Payment Online Tools
- Child Tax Credit Eligibility Assistant – allows individuals to answer a series of questions to quickly determine whether they qualify for the advance credit.
- Child Tax Credit Update Portal – allows individuals to view their eligibility for the payments, view advanced payments and, if they choose to, unenroll/opt out from receiving the monthly payments
- Child Tax Credit Non-filer Sign-up Tool – allows eligible individuals who don’t normally file an income tax return register for payments. Only use this portal linked from the IRS.gov website. Any other website is a Scam.
FAQs
- Topic A: General Information
- Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit
- Topic C: Calculation of the 2021 Child Tax Credit
- Topic D: Calculation of Advance Child Tax Credit Payments
- Topic E: Advance Payment Process of the Child Tax Credit
- Topic F: Updating Your Child Tax Credit Information During 2021
- Topic G: Receiving Advance Child Tax Credit Payments
- Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return
- Topic I: U.S. Territory Residents and Advance Child Tax Credit Payments
- Topic J: Unenrolling from Advance Payment
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