Last Updated: July 15, 2021
With the introduction of the American Rescue Plan back in March, the Child Tax Credit underwent a couple temporary changes for tax year 2021. One of the main adjustments included allowing families to receive part of the Child Tax Credit as monthly payments rather than waiting to get all of the money as a refund when they file their tax returns. This is considered an advance of the credit. The premise behind this change is to continue to help families who experienced a financial hit during the COVID-19 pandemic.
On June 7, the IRS officially announced the payment dates, with the first round of payments starting on July 15, 2021. The payment timeline is as follows:
- July 15, 2021
- August 13, 2021
- September 15, 2021
- October 15, 2021
- November 15, 2021
- December 15, 2021
IRS CTC Letters
At the end of June, the IRS began sending letters to the American families who may qualify to receive monthly Child Tax Credit payments. The two different letters were titled Advance Child Tax Credit Outreach 6416 and 6416-A.
The first letter was an eligibility notification. See an example of the first letter, Letter 6416. The second letter was more personalized and listed an estimate of the payment amount you could expect to receive each month based on the information the IRS has from your last filed tax return. See an example of the second letter, Letter 6416-A. For more information on the letters, visit the IRS’ resource page: Understanding Your Letter 6416 or 6416-A.
If you have not filed your 2020 tax return, the IRS urges you to file as soon as possible so they have the most current information to accurately process your payment. The IRS will otherwise use your 2019 return to calculate your possible credit amount.
Individuals who used the IRS’ Non-filers tool in 2020 are also eligible for the credit and should have received the letter notifications as well.
How much will your payment be?
This new monthly payment structure is designed to pay eligible families half of the credit amount for which they qualify. Families will receive the second half of the credit as part of their tax refund when they file their 2021 tax return. The maximum amount families can receive per month is $300 for each child age five and under and $250 for each child between the ages of six and 17.
Let’s dive into how that works.
The value of the credit significantly increased for 2021 with the passing of the American Rescue Plan. That said, it’s slightly complicated to determine how much you may qualify to receive. Here are the basics:
- Eligible families can get up to $3,600 per qualifying child who is under the age of six and up to $3,000 per qualifying child between the ages of six and 17. Prior to 2021, the credit was worth up to $2,000 per qualifying child and 17-year-olds were not included.
- The amount you receive is based on your adjusted gross income (AGI). You will get the maximum value of the Child Tax Credit if your AGI is:
- $75,000 or less for single filers,
- $112,500 or less for heads of household, and
- $150,000 or less for married couples filing a joint return and qualified widows and widowers
You can find your AGI on line 11 of your 2020 Form 1040 or 1040-SR.
If your AGI is higher than those limits, you could still receive a portion of the tax credit. In that event, the new portion of the credit that’s been temporarily added to the original $2,000 credit (either $1,000 or $1,600 per child) is reduced by $50 for every extra $1,000 you earn above the income thresholds. For example, if you file a joint 2021 return, have an AGI of $160,000 and two children five and under, your full Child Tax Credit amount will likely be $6,700.
The IRS’ New Advance Child Tax Credit Portal
The IRS created an Advance Child Tax Credit 2021 portal that houses information regarding the credit and corresponding payments. Additionally, the portal is home to three different tools related to managing the Child Tax Credit payments. All are accessible with internet access and a smart phone or computer.
The first tool is called the Child Tax Credit Eligibility Assistant, which allows families to find out if they qualify for the credit. The tool asks a series of questions to determine eligibility.
The second tool is called the Child Tax Credit Update Portal. Using this tool, families can verify their eligibility for the payments, choose to unenroll or opt out from receiving the monthly payments, and provide the IRS updated bank account information. Families who opt out will receive any credit amount they qualify for as a lump sum when they file their tax return next year. This tool is secure and password-protected.
The IRS has stated future versions of the Child Tax Credit Update Portal will allow families to view their payment history and check the status of their payments. They’ll also have the ability to make updates to bank account details, mailing address information, family status and income changes. For instance, if you have a baby or adopt a child in 2021, you’ll have the ability to update the IRS with that information to help ensure your payments are as accurate as possible. The IRS projects users will be able to update their mailing address in early August. The additional functionality is slated to be available in the fall. We’ll update this page as those features become available.
The third tool is the IRS Non-filer Sign Up Tool. Continue reading for more information on who should consider using this tool.
For more information on the tools, read the IRS’ official notice.
IRS’ Non-filer Sign-up Tool
Families who qualify for the Child Tax Credit but are not required to file a tax return can register for their monthly tax payments using the IRS’ Non-filer Sign-up tool available on the IRS website.
This tool is an updated version of the IRS’ Non-filers tool created in 2020 to help filers who weren’t required to submit a tax return register for the Economic Impact Payments (EIP) – or better known as the stimulus checks. It also allows people who aren’t otherwise required to file a return claim the Recovery Rebate Credit for any amount of the first two rounds of EIP they missed.
With this free tool, families can conveniently provide the IRS the basic information needed to receive their monthly Advance Child Tax Credit payments. Eligible families need to submit the following information:
- social security number (SSN)
- names and SSNs for qualifying children age 17 and under
- information on other dependents
- direct deposit bank information (If you do not have a bank account, the IRS will issue the monthly payments in the form of a paper check. Please note it will take longer for you to receive the money in that instance.)
You may need to register for the monthly payments if all of the following are true about your situation:
- You earn little or no income, and therefore, do not have an income tax return-filing obligation.
- You did not file a tax return for 2019 or 2020.
- You did not use the IRS’ Non-filers tool last year to register for the EIP.
File Your 2020 Tax Return for Accurate Payments
If you believe you are eligible for the 2021 Child Tax Credit, the IRS urges you to file your 2020 return as soon as possible if you haven’t already done so. If you have filed and qualify for the credit, there are no further steps you need to take to get your money.
Filing your 2020 return as soon as possible will provide the IRS with the most accurate information about your tax situation. That includes your dependent information as well as current bank account details. Monthly payments will be issued via direct deposit or paper check.
If you are not required to file a tax return because you earned little to no income, use the IRS’ Non-filer Sign up tool to register. See the information above to determine if you need to register.
Child Tax Credit Monthly Payment FAQs
How much are the monthly payments?
If you qualify, the monthly payment you receive is dependent upon the number of qualifying children you have as well as your AGI. There are income qualifications to receive the full credit. Families who qualify can receive up to $300 for each qualifying child age five and under per month and $250 for each qualifying child ages six to 17. The IRS will also make a one-time payment of $500 for dependents age 18 or full-time college students up through age 24.
Additional detail on the calculation of the credit is explained above.
How does the IRS know how much to send me?
The IRS will base your eligibility for the credit as well as calculate your credit amount from your last filed tax return. That is why the IRS urges families to file their 2020 tax returns as soon as possible to ensure they have the right information to calculate the payments as accurately as possible.
The IRS has also created an online Non-filer Sign-up tool that allows eligible families who do not have a tax filing obligation to submit their information to receive the monthly payments.
What if my address or bank account information has changed from what the IRS has on file?
The best way to update your bank account information with the IRS is to file your 2020 tax return. The agency will send your monthly payments to the bank account that’s submitted with your return.
You can also use the Child Tax Credit Update Portal to submit new bank account information. The tool does not currently allow you to update your mailing address or other information related to your tax situation. The IRS has stated they plan to add that functionality in future versions. Continue to check back here for updates or follow us on Facebook, Twitter, or Instagram to get updates as they are available.
If I used Refund Transfer when filing my 2020 tax return with TaxAct, will my monthly payment be sent to my bank account?
Yes! The IRS will send your monthly payments to the bank account you submitted when you filed – regardless of whether you used our Refund Transfer feature to pay for your filing fees.
Can I receive the credit all at once, or do I have to receive it monthly?
Families now have the option to opt out of the monthly payments using the Child Tax Credit Update tool. If a family opts out, they will receive any remaining credit amount as a lump sum in their 2021 tax refund. NOTE: If you are a joint filer, both you and your spouse will need to log in and opt out of receiving payments in order to stop the payments.
Because the monthly payments are designed to pay half of the credit amount in advance, families who do not opt out will receive the remaining portion they qualify for as part of their 2021 tax refund.
If I have a baby or adopt a child in 2021, can I get money for them?
Yes! Any qualifying children you add to your family in 2021 may make you eligible for additional money. Once that functionality is available, you can use the Child Tax Credit Update Portal to submit your new dependent’s information to the IRS and update your payment amount.
If you do not update your information with the IRS during 2021, you can still claim the credit for that qualifying child when you file your 2021 tax return. Any credit money you qualify to receive will either go toward paying down your tax liability or come to you as part of your tax refund.
How do the payments work if I have shared custody of my child/ren?
The payments will go to the parent who last claimed the child(ren) as a dependent on their 2020 tax return. If that same parent is not planning to claim the child(ren) on their 2021 return, we recommend they use the Child Tax Credit Update tool to opt out of the monthly payments.
Later this year, the Child Tax Credit Update Portal (CTC UP) will allow parents to update their dependent information for 2021 to inform the IRS about their qualifying children and begin receiving payments if desired.
If you do not receive Child Tax Credit monthly payments for your qualifying child(ren), you can claim the full amount of your allowable Child Tax Credit when you file your 2021 tax return.
Do I have to earn income to receive the payments?
No. Even if you earn $0 in 2021, you are still eligible to receive the payments. If you are not required to file a tax return, you must use the IRS’ Non-filer Sign-up tool to submit your information for the credit.
Are the Child Tax Credit payments taxable?
No; similar to the stimulus payments, this money is not considered income and, therefore, is not taxable on your return. The Child Tax Credit payments are advance payments of your tax year 2021 Child Tax Credit.
That said, the Child Tax Credit payments you receive during 2021 are based on the IRS’ estimate of your 2021 Child Tax Credit eligibility from your 2020 return. If you end up receiving more than what you, ultimately, qualify to receive when you file your 2021 tax return, you may have to pay back some of the money.
For example, let’s say you receive monthly Child Tax Credit payments for qualifying children claimed on your 2020 tax return, but you no longer can claim them on your 2021 return. The monthly payments that you received based on those children will be added to your 2021 income tax unless you qualify for repayment protection. For more information regarding your eligibility for repayment protection, visit the IRS’ Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return resource page.
Will receiving these monthly payments affect any of my government benefits?
No. The payments are not counted as income, therefore, they cannot influence any benefits you currently receive.
Will I receive these monthly payments every year?
Currently, the monthly payments are only scheduled to occur in 2021. They are an advance of the Child Tax Credit that qualifying families will claim on their 2021 tax returns. The increased value is also only valid for tax year 2021. In 2022, the value of the credit will reduce back to $2,000 per qualifying child under the age of 17.
We will provide updates to this page as new information becomes available.
I opted out but still received a payment on July 15, why did that happen?
It’s likely because you didn’t opt out before the IRS started pulling payment information and processing it for filers. The IRS begins that process a couple weeks before the payments are issued, and anyone who has not opted out before that timeframe is still captured in the group to send a payment.
The good news is you are now opted out of any future payments, so you shouldn’t expect to receive one in August or throughout the remainder of the year.
How did the Child Tax Credit change from 2020?
As many families know, the Child Tax Credit is not new. The American Rescue Plan revamped it for 2021, however.
In 2020, the maximum annual credit was $2,000 per child under age 17. In 2021, the maximum annual credit increased to $3,000 per child age six to 17 or $3,600 per child age five or younger.
Another change is in the refund-ability of the credit.
Quick tax lesson: Tax credits reduce your tax liability on a dollar-for-dollar basis, meaning if you owe $1,000 in taxes and claim a credit worth $1,000, your tax liability is now $0. Another example – if you owe $1,500 in taxes and claim a $1,000 tax credit, your tax liability is now $500. Tax credits are also refundable or non-refundable. If refundable, that means you get any remaining money that doesn’t go toward paying down your tax liability as part of a tax refund. If not refundable, you only get to take advantage of the credit to pay down your tax liability. Once your tax bill is at $0, you can’t get anything more from the credit. For instance, if you owe $500 in taxes and claim a $1,000 non-refundable credit, $500 of that credit will go toward paying down your tax bill, but you will not receive the remaining $500 as a refund. The opposite is true for a refundable tax credit.
In 2020, the Child Tax Credit was partially refundable. If your tax liability was $0, and you claimed the credit, you could get $1,400 of it as a tax refund. In 2021, all of the Child Tax Credit is refundable. Therefore, you’ll get the full amount you qualify for as a refund if your tax liability is $0.
Additionally, in prior years a filer needed at least $2,500 in earned income to claim the credit. In tax year 2021, there is no longer that earned income limitation. You do not need any earned income to receive the Child Tax Credit. Anyone eligible to receive the credit, however, will be required to file a 2021 tax return next year.