As of July 15, eligible parents can get monthly payments for their children due to a new federal law. Known as the advanced child tax credit, these monthly credits come by way of your income taxes. If you qualify, you can get half of your yearly tax credit when you file your taxes.
As part of the American rescue plan signed by President Joe Biden in March, the new advance payment adds to the existing child tax credit that was formed back in 1997. This amount has been increasing over the years and will increase again with the new plan on July 15. Currently, the advance payment and the increased amount are in effect until December 15, 2021.
Advanced Child Tax Credit: What Is It?
The new prepaid child tax credit pays parents a portion of the tax credit they will receive in monthly installments at the end of the year. The parents will then report that they have received these payments when they file their tax returns in April and will apply for the other half of the credit. The tax credit is the amount you can deduct from the income tax owed to the government.
For example, if you are eligible for a $1,000 tax credit and you owe $3,000 in income tax, the amount of tax you owe will be reduced to $2,000. Parents with children under the age of 6 are eligible for up to $3,600 per child or $300 per month. Parents with children between the ages of 6 and 17 are eligible for up to $3,000 per child or a monthly advance payment of $250. At present, these increased amounts and advance payments expire by the end of 2021.
Who Can Receive It?
In order to be eligible to receive the advanced child tax credit, you must have at least one child younger than 18 years old. Moreover, you have to meet requirements based on your income.
To be eligible to receive the full amount of the tax credit, you can’t bring in more than $75,000 a year if you’re filing by yourself. If you’re filing jointly (married), you can’t make more than $150,000 a year. And if you’re filing as the head of the household, you can’t make more than $112,500 a year.
If your income exceeds the maximum amount to qualify for full payment, your tax credit goes down by $50 each time your income goes beyond the maximum $1,000 until the tax credit reaches $2,000. If you make $400,000 a year jointly or $200,000 alone, the second phase-out starts.
Depending on your circumstances, for every $200,000 in income or $400,000 for every $1,000 in income, the second phase-out will reduce the tax credit by $50. You must also live in the United States for a minimum of six months during the year. Moreover, the child must live with the parent who claims the child is a dependent for a minimum of six months, and your child must be under 18 years old by January 1, 2022, to qualify for this credit.
Payments and What to Expect
According to the full tax credit, each child less than the age of 6 brings in $300 a month, while children between the ages of 6 and 17 years bring in $250 each month. These payments will account for half of the credit, including:
Younger children: $1,800
Older children $1,500
Parents will apply for the remaining half of the tax credit when filing taxes. What’s more, the advance payment and the increased amount are currently scheduled to end by the end of 2021. Unless a new law is passed, the tax credit will go back to $2,000 per child, with no prepayment options.
You will receive your tac credit via check or direct deposit. So if you’ve previously arranged direct deposit through the IRS, you can expect to get your credit that way. If necessary, you can change your payment method via the IRS’s portal.
Need Assistance with Your Tax Matters?
We invite you to contact IRS attorney Mary E. King if you need help filing your taxes. She has extensive experience successfully handling tax matters of all kinds and can ensure that you are ready for the next tax season.
When you secure the services of the Law Offices of Mary King, you can look forward to the highest standard of service to ensure that your taxes are handled and prepared correctly.
The information in this blog post is for reference only and not legal advice. As such, you should not decide whether to contact a lawyer based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.