The American Rescue Plan expanded and increased the Child Tax Credit (CTC) for 2021. U.S taxpayers with children under the age of 6 can this year claim a CTC of up to $3,600, and those parents with children aged between 6 to 17 years can claim up to $3,000 per child. The children who will turn 17 years in 2021 are also eligible for CTC. In the previous year, the credit was up to $2,000 and not eligible for children below 17 years.
The credit is also refundable, and there is no limitation on the total CTC a taxpayer with several children can claim. Low-income families are eligible for the maximum CTC regardless of their annual income.
When will those families qualified for CTC start to receive payments?
Parents who qualify for CTC will start to receive the payments on 15 July. According to the Internal Revenue Service (IRS), more than 36 million families who have applied for the monthly child tax credits may qualify.
The IRS has begun to send the first letter to the eligible families based on the information they included when filing their 2019- or 2020-income tax. The IRS will later send the second letter, which entails estimating the monthly payment they have qualified for. The IRS will determine the payment amount according to the 2019- or -2020 tax returns.
Qualified families will receive the advanced funds through either direct bank deposit or by check. Children below the age of 6 will receive up to $300 each month, while those ranging from 6 to 17 years will receive up to $250. The IRS dates for issuing CTC monthly payments for 2021 will be 15 July, 13 August, 15 September, 15 November, and 15 December.
I have not recently filed my annual returns; will I be eligible for the 2021 child tax credits?
The CTC is eligible for taxpayers who filed their 2020 return or 2019 return. The deadline to file for the federal tax was on 17 May. Eligible families who did not file their 2019- or -2020 returns can request an extension to file an individual income tax return using Form 4868.
With the new additional IRS tools and online resources, families and individuals will alert the IRS of any changes regarding their number of eligible children, their income, their filing status, or make changes to ensure no error occurs during the disbursement. Using the tools, eligible individuals and families who do not want the advance payment can decline the payments after receiving them.