Monthly child tax credit payments will warm parents’ hearts this summer

Monthly installments to begin July 15

Mid-summer will bring major good news for many American parents.

Monthly payments through the new federal enhanced child tax credit will begin July 15. for 39 million households with about 65 million children, or 88 percent of children in the U.S., according to the IRS.

This year, the maximum enhanced child tax credit is $3,600 for children younger than age 6 and $3,000 for those between 6 and 17. 

Those payments will be sent out as an advance on 2021 taxes in monthly installments that could be as much as $300 per month for younger children and $250 per month for older ones. The credit is per child in each household, meaning a family with three children ages 4, 8 and 12, for example, could receive up to $800 on a monthly basis (A $300 credit for the 4-year-old, and $250 each for the older kids.)

“For working families with children, this tax cut sends a clear message: Help is here,” said President Joe Biden,” said in a statement on May 16. 

Who qualifies for the maximum credit?

Most American families qualify for some amount of money through the child tax credit.

The full credit is available to married couples with children filing jointly with adjusted gross income less than $150,000, or $75,000 for individuals. The enhanced tax credit will phase out for taxpayers who make more money and cease for individuals earning $95,000 and married couples earning $170,000 filing jointly.

Taxpayers who make more than that will still be eligible for the regular child tax credit, which is $2,000 per child under age 17 for families making less than $200,000 annually, or $400,000 for married couples.

How do I make sure my family gets the payment?

Most families eligible to receive the payments don’t have to do anything right now, according to the IRS. The agency will use the information filed on 2020 tax returns first to determine eligibility and will notify taxpayers, Ken Corbin, commissioner of the IRS’ Wage and Investment Division, during a Friday tax conference.

For those who haven’t filed 2020 taxes, the IRS will use 2019 returns.

The IRS is also working to make a portal available for non-filers to submit their information and receive the credit. The agency also plans on making an additional portal for taxpayers to submit other changes going forward, such as updating family information if there’s a change in custody, which parent is claiming the child and credit or if you have a child during the year.

“Look for a suite of tools,” said Corbin.

How will payments be sent?

As with the stimulus checks sent out by the IRS earlier this year and last, most of the monthly child tax credit payments will be sent by direct deposit — some 80 percent of those eligible will get the money this way, according to the agency.

If the IRS has direct deposit information on your tax return, it’s likely this is how you’ll receive the monthly credit. If you don’t have direct deposit, the IRS will also be sending out paper checks and debit cards to some families.

Can I opt out?

Families can opt out of receiving the monthly payments for the credit through an IRS portal. Those who do this won’t get the monthly amounts but will still receive the full credit they are eligible for when they file their 2021 taxes in 2022.

Some families may choose this route because they don’t need the monthly payments immediately or prefer to get a large lump sum of money back from the IRS as a tax refund, said Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center

“There’s evidence that shows that some people really like getting that large tax refund and can use it as an opportunity to purchase a large household item like a refrigerator or put together first and last month’s rent so they can move,” she said.