Back in March, President Biden signed the American Rescue Plan. Part of that plan is the enhanced federal child tax credit. This will send monthly payments to families around the country. Traditionally, this credit would come in the spring when families filed their taxes. However, government officials hope that by giving a portion of the overall credit in monthly stipends, they can help ease the burden of the rising cost of childcare.
The American Rescue Plan also raised the maximum amount available for the federal child tax credit. Currently, families will get $3,600 for children under 6. They will get $3,000 for children age 6-17. Half of the amount will come in monthly installments. The other half will come when families file taxes. This amount applies to every child in the household.
The first round of enhanced federal child tax credit payments will start hitting the bank accounts of families across the country this Thursday, July 15th. At this time, many people still have questions about the credit. Here is what you need to know about the monthly stipends.
Who is Eligible for the Enhanced Federal Child Tax Credit Payments?
If you have a child under the age of 17, you are eligible for the monthly federal child tax credit payments. However, the amount of each payment will vary depending on income. The age of children will also affect the amount of money in each payment.
Married couples with children who file their taxes jointly and have a gross annual income of less than $150,000 are eligible for the maximum benefit. This comes out to $250 a month for children 6-17 and $300 a month for kids under 6. Those filing separately or filing under the head of household who make $75,000 or less annually are also eligible for the maximum benefit.
After those amounts, the benefits begin to shrink. Families who file jointly and make over $170,000 will not be eligible. Nor will individuals or families who file their taxes separately who make over $95,000.
Low-income families who have children but usually do not file taxes because they have no taxable income are also eligible. They just need to sign up through the IRS’ non-filer tool. However, if those families already signed up to receive stimulus checks, they don’t need to do anything.
Those who want to double-check their eligibility can use the enhanced federal child tax credit eligibility tool.
How to Get the Payments and When Will They Come?
The enhanced federal child tax credit payments will come the same way previous stimulus checks and tax refunds came.
Families or individuals who filed taxes in 2019 or 2020 as well as those who received stimulus checks are already enrolled. If none of their information has changed, they should receive the federal child tax credit payments without issue.
However, families who received previous payments via direct deposit whose bank account information has changed will need to update that with the IRS. Likewise, those who received stimulus payments or tax refunds by mail need to be sure their information is up to date with the IRS. That can be done via the Child Tax Credit Update Portal.
Federal child tax credit payments are currently only approved for the rest of 2021. The first will come on July 15th. Subsequent payments will come on the 15th of every month except August. That payment will come on the 13th because the 15th falls on a weekend
How to Opt-Out of the Federal Child Tax Credit Payments
Those who would rather receive their tax credit in one lump sum, as usual, can still do so. Those families can use the Update Portal to opt out of future monthly stipends. However, it is too late to cancel July’s installment. The cutoff for canceling next month’s payment is August 2nd.
Those families will receive their entire child tax credit when they file their 2021 tax returns. There are no penalties associated with opting out of monthly installments.