Top 5 Things to Know About the Child Tax Credit

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You’ve probably heard news reports about Child Tax Credit payments, or from friends who’ve been getting that monthly money. During the second half of 2021, the Internal Revenue Service will send a portion of Child Tax Credit funds ^[1] ahead of the 2022 tax filing season.

However, not everyone who qualifies has gotten paid. For example, if you didn’t file federal taxes in 2019 or 2020, the IRS might not know whether or not you’re eligible. And you may be eligible for the Child Tax Credit even if you didn’t work in 2020, or are not working now.[2]

Are you leaving money on the table? Here’s what you need to know about advance Child Tax Credit payments.

Table of Contents

• What is it, and who can get it?
• How much will I get paid?
• When and how will I be paid?
• Will it hurt my eligibility for other programs?
• Do I have to pay it back on my taxes later?

1 - What is it, and who can get it?

Normally, you claim the Child Tax Credit when filing your federal tax return. But this year, the American Rescue Act^[3] expanded the Child Tax Credit to include these changes:^[4]

• The amount rose to as much as $3,600 per child, depending on age.
• Half of the Child Tax Credit will be given out in advance, via monthly payments from July to December 2021.
• Kids under age 18 (instead of 16) are now included; dependents aged 18 and full-time college students under age 24 will qualify you for a one-time sum of $500, to be paid in April 2022.^[5]

The monthly payment will go out automatically^[6] to any qualifying taxpayer who filed a federal tax return in 2020, or who claimed dependents on the 2019 return. It will also go to those who didn’t file taxes but did apply for Economic Stimulus Payments. Payments will be^[7] via direct deposit if the IRS has your bank account information; if not, they’ll be sent by check.

If you didn’t file a tax return in 2020, you can use the “Non-Filer Signup Tool” to let the government know the number and ages of your children, including children born this year. Find it here.

To get the Child Tax Credit payments, you – and your spouse, if you filed jointly – have to meet the following criteria:^[8]

• Be the parent of a qualifying child with a Social Security number who is under age 18 as of Dec. 31, 2021 (or of an 18-year-old dependent or full-time college student under age 25)
• Lived in the United States for more than half the year, or filed a joint return with a spouse whose main home is the U.S. for more than half the year
• Filed a 2019 or 2020 tax return claiming the Child Tax Credit, or filed for the Economic Impact Payment in 2020 using the non-filers tool
• Earned under a certain income amount (more on that below)

2 - How much will I get paid?

That depends. The Child Tax Credit is up to $3,600 per year for kids under age 6, and up to $3,000 for kids under age 17. Generally speaking, you can expect $300 per month for each qualifying child under age 5 and $250 for each child ages 6 to 17.^[9]

However, the Child Tax Credit is income-based. You’ll be eligible for that full amount[10] if your adjusted gross income is:

• Under $75,000 as a single filer
• Under $112,500 as head of household
• Under $150,000 filing jointly

If you earn more, the Child Tax Credit will drop by $50 for every $1,000 of income over the limit for your filing category.^[11]

3 - When and how will I be paid?

As of Aug. 13, two payments have been issued. If you’re eligible to receive the payments and haven’t gotten them, visit the Child Tax Credit Update Portal to check whether your payments are pending or have been processed.

While you’re there, you can also update your bank account or address, and add any changes to your marital status, number of dependents and income since your last tax filing.

If the portal shows payments were sent but you haven’t received them, you can request a trace by filling out Form 3911, “Taxpayer Statement Regarding Refund.” However, you have to let a certain amount of time^[12] pass first:

• Direct deposit: 5 days after the expected date of deposit
• Paper check sent to your address: 4 weeks after it was mailed
• Paper check sent to forwarding address on file: 6 weeks after it was mailed
• Foreign address: 9 weeks after it was mailed

Remember: You must have claimed your child as a dependent^[13] in order to receive the advance Child Tax Credit. If you and your ex take turns claiming the child, the payment will go to the parent who filed most recently.

4 - Will the child tax credit hurt my eligibility for other programs?

No. The Child Tax Credit doesn’t count as income.^[14] It has no impact on your eligibility for federal benefits like SNAP and WIC.

5 - Do I have to pay it back on my taxes later?

Generally speaking, no. Again, this is a tax credit rather than income. You’re just getting half of it in advance, instead of having to wait until filing your federal tax return in 2022.

Some cases might require repayment, however. If you share custody of your child, only one parent can receive the advance Child Tax Credit payments: the one who claimed the child on their 2020 return.^[15]

Claiming the payment incorrectly could mean that one of you will have to pay back some or all of the money.

In addition, the advance payments are based on your estimated Child Tax Credit for 2021.^[16] If that estimated credit changes – for example, if your income increased greatly this year – you could potentially receive more Child Tax Credit money than you actually qualify for, and you might have to repay that money.^[17]

Bottom line

Don’t leave money on the table! Find out if you’re eligible, submit your information and manage payments at the Internal Revenue Service portal here.

Sources

1. Benefits.gov: Child Tax Credit
2. IRS.gov: Advance Child Tax Credit Eligibility Assistant
3, 16. IRS.gov: 2021 Child Tax Credit and Advance Child Tax Credit Payments General Information
4. Treasury.gov: Fact Sheet: The American Rescue Plan Will Deliver Immediate Economic Relief to Families
5. Tax Policy Center: What is the Child Tax Credit?
6. IRS.gov: IRS Unveils New Tool to Help Low-Income Families Register for Monthly Child Tax Credit Payments
7. IRS.gov: 2021 Child Tax Credit and Advance Child Tax Credit Payments – Advance Payment Process
8. IRS.gov: Advance Child Tax Credit Payments in 2021
9, 10, 11. IRS.gov: 2021 Child Tax Credit and Advance Child Tax Credit Payments – Calculation
12. IRS.gov: 2021 Child Tax Credit and Advance Child Tax Credit Payments – Eligibility
13, 15. TaxPolicyCenter.org: Keeping the Monthly Child Tax Credit Coming, Limiting Risk of Overpayments
14. WhiteHouse.gov: Child Tax Credit for Non-Filers
17. IRS.gov: 2021 Child Tax Credit and Advance Child Tax Credit Payments – Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return

About the author

Longtime personal finance writer Donna Freedman lives and writes in Anchorage, Alaska. See her on Linkedin and Twitter

About the reviewer

Lauren Bringle is an Accredited Financial Counselor® and Content Marketing Manager with Self Financial – a financial technology company with a mission to increase economic inclusion by helping people build credit and savings so they can build their dreams. Connect with her on Linkedin or Twitter.