The American Rescue plan increased the maximum Child Tax Credit amount in 2021 to $3,600 per child for children under the age of 6 and to $3,000 per child for children ages 6 through 17.
Beginning July 15, the IRS is scheduled to begin making monthly advance child tax credit payments to taxpayers who qualified for the credit based on their 2020 tax return. The advance portion of the payment will be half of what the taxpayer qualifies for based on their 2020 tax return.
Note, however, that if taxpayers aren’t qualified for the same amount of credits when their 2021 return is prepared, these payments will be required to be repaid. (Similar to how the advance premium tax credit worked.)
The IRS has announced online tools to help families manage Child Tax Credit Payments.
Taxpayers may use the portal to opt out of these payments if they do not want to receive the credit. Some reasons to opt-out include:
- The taxpayer’s estimated tax payments were based on the assumption that they would receive the credit on their tax return.
- The taxpayer’s income will be higher in 2021 so that the credit will be fully or partially phased out.1
- Someone else (an ex-spouse or other family member for example) qualifies to claim the child in 2021
Once a taxpayer opts out, they cannot re-enroll.
Taxpayers who weren’t required to file in 2020 may also use the portal to sign up for payments and the IRS has announced that a feature to track the status of payments will also be added.
- The credit begins to phase out at AGI of $150,000 for MFJ ($75,000 single/$112,500 HoH) and is fully phased out at AGI of $400,000 for MFJ ($200,000 single & HoH).