The American Rescue Plan Act (ARPA) of 2021 temporarily expanded the Child Tax Credit (CTC) for 2021 only. In addition to expanding the credit, the ARPA allows for advance payments of CTC to be made in monthly installments beginning in July.
Details of this expanded CTC:
- Up to $3,000 per qualifying child between ages 6 and 17 (up from $2,000 per child and includes children age 17 at the end of the tax year).
- Up to $3,600 per qualifying child under age 6 (up from $2,000 per child).
The increased amounts are phased out for married taxpayers with adjusted gross income over $150,000, $112,000 for head of household, and $75,000 for all other taxpayers.
Advance payments will be made monthly from July through December to eligible taxpayers up to 50% of the estimated credit. The remaining credit will be taken on the taxpayer’s 2021 return. The credit is estimated based on the 2020 tax return (or 2019 returns if the 2020 returns are not filed and processed yet).
Advance payments are automatic, but taxpayers will have opportunity to decline receiving advance payments, and update information about changes in their income, filing status, or number of qualifying children – details on how to make these changes will be announced soon.
Advance payments will be made directly to bank accounts for taxpayers set up to receive direct deposit. All other taxpayers will receive a check or debit card in the mail.
Taxpayers whose advance payments exceed the allowable credit generally must pay back any excess with their 2021 federal tax return.
Please contact us with any questions or concerns.