The 2021 advance child tax credit (CTC) payments, which were established under a recent law, will begin being made on July 15, 2021, the IRS announced. The tax agency also stated that "roughly 39 million households — covering 88% of children in the United States — are slated to begin receiving monthly payments without any further action required."
Taxpayers are allowed a CTC for each qualifying child. The credit was temporarily expanded and made refundable for 2021 by the American Rescue Plan Act (ARPA). It phases out for taxpayers with adjusted gross incomes (AGIs) over certain thresholds (see right-hand box).
For 2021, a qualifying child with respect to a taxpayer is defined as one who is under age18 and whom the taxpayer may claim as a dependent (in other words, a child related to the taxpayer who generally lived with the taxpayer for at least six months during the year). The child must also be a U.S. citizen or national, or a U.S. resident.
The ARPA increased the maximum CTC — for 2021 only — to $3,600 for children under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents' income is below a certain threshold.
Under prior law, the maximum annual CTC for 2018 through 2025 was $2,000 per qualifying child but the income thresholds were higher and some of the qualification rules were different.
Under the ARPA, the IRS is required to establish a program to make periodic advance payments that in total equal 50% of the IRS's estimate of an eligible taxpayer's 2021 CTC. These payments are to be made during the period July 2021 through December 2021.
The IRS has announced the payments will begin on July 15, 2021 and thereafter, they'll be made on the 15th of each month unless the 15th falls on a weekend or holiday.
Recipients will receive the monthly payments through direct deposit, paper check or debit cards. The IRS says that it is committed to maximizing the use of direct deposit.
More Facts about Advance CTCs
Eligible families will receive up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and older.
The increased credit amount will be reduced (or phased out), for households with modified adjusted gross income (MAGI) above the following thresholds:
- $150,000 for married taxpayers filing jointly and qualifying widows/ widowers;
- $112,500 for heads of household; and
- $75,000 for other taxpayers.
Higher-Income Parents May Get a Lower Credit
If your income is too high to receive the advance CTC payments, you may still qualify to claim the $2,000 CTC on your tax return for 2021. The rules are complex. For more information, see our previously published article "Big Changes to the Child Tax Credit for 2021." Contact us with any questions.