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What are the Advance Child Tax Credit Payments?
The American Rescue Plan Act expands the child tax credit for tax year 2021. The maximum credit amount has increased to $3,000 per qualifying child between ages 6 and 17 and $3,600 per qualifying child under age 6.
If you’re eligible, you could receive part of the credit through advance payments of up to:
- $250 per month for each qualifying child age 6 to 17 at the end of 2021.
- $300 per month for each qualifying child under age 6 at the end of 2021.
The expansion of the credit also means it:
- is fully refundable, meaning you can claim the credit even if you don’t have earned income or don’t owe any income taxes.
- now includes children who turn 17 in 2021.
- allows you to receive half of the 2021 estimated credit, in advance.
If you qualify for these payments, you have TWO options:
- You can receive advanced payments of HALF these credits from July to December instead of waiting for your 2021 tax return.
- You can choose to opt-out of advanced payments. The deadlines to either opt-out or make changes to how you receive your Advance Child Tax Credit Payments are listed below.
Opt-Out Deadlines & Payment Dates for Monthly Child Tax Credit Payments
Payment Date: July 15, 2021
Opt-Out Deadline: June 28th, 2021
Payment Date: August 13, 2021
Opt-Out Deadline: August 2, 2021
Payment Date: September 15, 2021
Opt-Out Deadline: August 30, 2021
Payment Date: October 15, 2021
Opt-Out Deadline: October 4th, 2021
Payment Date: November 15, 2021
Opt-Out Deadline: November 1, 2021
Payment Date: December 15, 2021
Opt-Out Deadline: November 29, 2021
Why might you want to opt-out?
The main reason a taxpayer may want to opt-out of the Advance Child Tax Credit Payments is that they’re likely to have a tax bill due for 2021 and would prefer to leave their Child Tax Credit “on account” to help cover the expected tax bill.
Unlike the Economic Impact Payments, the Advanced Child Tax Credit Payments will impact the return you’re used to seeing. Here are a few general examples provided by MyTaxPrepOffice.
Example 1: Taxpayer is married with 2 kids, 10 and 14 years old. The taxpayer’s taxable income is $35,000; the taxpayer typically receives a refund of $2,000 to $3,000 due to the Child Tax Credit and the Earned Income Credit.
If the taxpayer does not Unenroll from Advance Payments, the potential Child Tax Credit of $3,000 (for two children) will be spread out over the rest of this year. The taxpayer will receive Advance Payments of $500 a month until December.
When the taxpayer’s 2021 return is filed the refund will be reduced by the total amount of Advance Child Tax Credit Payments received and they might only receive a $1,000 refund or less.
Example 2: Taxpayer is Head of Household with 3 kids, 15, 11, and 8 years old. The taxpayer’s taxable income is $100,000. The taxpayer typically receives a refund of $200 because the taxpayer minimizes the amount of tax withheld from their paycheck to cover the tax owed.
If the taxpayer does not Unenroll from Advance Payments, the potential Advanced Payments will be $750 a month through December. The advanced payment will be $4,500.
When the taxpayer’s 2021 return is filed the refund will be reduced by the total amount of Advance Child Tax Credit Payments received and they will likely owe the IRS $1,500.
So you can see that receiving the Advance Child Tax Credit Payments may or may not be the best option for you depending on your tax situation.
How to update payment information for Advance Child Tax Credit Payments
- Use the Child Tax Credit Update Portal to confirm eligibility for payments. If eligible, the tool will also indicate whether you are enrolled to receive your payments by direct deposit.
- It will list the full bank routing number and the last four digits of your account number. This is the account where you received your July 15 payment.
You can change the bank account receiving the payment starting with the August 13 payment. The DEADLINE to do this is August 2nd; otherwise, it will apply to your September payment.
- If you received your first payment by check/mail you can use the Update Portal to add your bank account information.
Important! Couples who are married and file jointly must both update their bank account information the same day to the same account to continue getting joint payments.
We hope this helps! The IRS is the best resource for the most current and accurate information.
2021 Child Tax Credit and Advance Child Tax Credit Payments Frequently Asked Questions
Bri Jackson is a QuickBooks ProAdvisor, Tax Consultant, and co-founder of Next Gen Tax & Financial Services. She helps gig economy workers and self-employed individuals with tax strategy and financial planning.
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