IRS expands Child Tax Credit for 2021

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The Internal Revenue Service has sent more than 36 million letters to families notifying them they may be eligible to receive advance monthly Child Tax Credit (CTC) payments starting in July.

The temporary expanded CTC was authorized by the American Rescue Plan Act (ARPA) for 2021.The CTC is a benefit that helps with the costs of raising a child.

The eligible amount for each qualifying child between 6-18 at the end of 2021 is $3,000 and $3,600 for each child under six. The expansion includes those unemployed, those who otherwise do not owe federal income tax and families with no income are also eligible to receive the credit.

Beginning in July, the IRS said eligible families should begin receiving advance payments of $250 or $300 per child, depending on the child’s qualifying age. The advance payments amount to one-half of the CTC credit.

According to the IRS, the new maximum credit is available to taxpayers with a modified adjusted gross income (AGI) of $75,000 or less for singles, $112,500 or less for heads of household, and $150,000 or less for married couples filing a joint return and for qualified widows and widowers.

For most people, the IRS said the modified AGI is the amount shown on Line 11 of their 2020 Form 1040 or 1040-SR.

Volunteer AARP tax counselor, Bob Polkinghorn, cautioned that taxpayers need to realize these are advance CTCs. Taxpayers who receive advance CTC payments for more than their actual 2021 allowable amount will have to repay the excess amount.

Eligible families will begin receiving advance payments, either by direct deposit or check, on the 15th of each month beginning in July until Dec. 15.

The IRS has launched a tool, The Advance Child Tax Credit Eligibility Assistant, on their website at to assist families in determining if they qualify, and if so, for how much. Taxpayers may also opt out of the advance payment program. The IRS announced the tool will soon be available in Spanish.

The estimate of one’s 2021 CTC is based on information shown on their processed 2020 tax return, or the 2019 return if a 2020 was not filed.

Polkinghorn noted, “if taxpayers had or will have a child in 2021, then the IRS will not account for this child in the advanced CTC payments. However, the IRS will account for the 2021 child when the taxpayer submits their 2021 return. Once the taxpayer’s 2021 return is completed and submitted with all the new child’s information, the taxpayer will receive the full CTC payment ($3,600).”

As with all tax concerns, taxpayers should consult with a tax professional.

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