With the extended tax deadline officially behind us, many people are looking toward the upcoming child tax credit payments that were approved by President Biden.
However, you can choose to opt out of these monthly payments if you want. Here's why you might want to, and how to go about it if you decide it's right for you.
The upcoming July 15 child tax credit payment start date, explained
On July 15, the government will start sending out monthly payments for the child tax credit approved by the Biden administration for 2021.
The payments will be released monthly, with families receiving $250–$300 per month. These monthly payments will amount to 50 percent of the total payments owed by the government, with the remaining half to be paid upon next year's tax return.
You will receive your payments like you received your tax return or stimulus check (direct deposit, check, or debit card).
How much is the child tax credit for 2021?
Families who claim the credit receive $3,600 per child under 6 years old by the end of the year, and $3,000 per child between the ages of 6 and 17 (including kids who turn 17 in 2021).
This amount starts to phase out once the household income exceeds $150,000 for married couples, $112,500 for heads of household, or $75,000 for everyone else.
What happens if you opt out of the monthly child tax credit payments?
There are a few reasons why you might want to opt-out of the monthly child tax credit payments.
First, you can save it all to get one large payment at tax return time next year. This might be beneficial for people who think they will owe taxes because they're self-employed or otherwise—or if they just want more money in their refund.
You might expect your household or individual earnings to increase, in which case you don't want to receive the payments now in case you have to return them during next year's tax season.
If you don't want to have to deal with a potential overpayment from the IRS of any kind, you can always opt out of the monthly payments.
Should you opt out of the child tax credit?
There isn't a penalty to opt-out of the child tax credit. However, the credit is meant to be spent soon or next year. If you think your income will stay below the threshold for the credit, or if you just want the opportunity to invest in your children now, don't opt-out.
If there's a good chance that you might receive an overpayment, opting out might be wise.
If you had or are having a baby (or are gaining a new dependent) in 2021, you might not be eligible yet, but you can receive your belated credit next year.
How to opt out of the child tax credit.
Mark your calendar for July 1, because that is when the IRS will launch two portals for the new child tax credit payment system. At that time, you can opt-out of the payments. Pay attention to the IRS website page about advance child tax credit payments, where it says it will "provide more information about advance payments soon."