Parents in the U.S. who have children under 18 years old should be prepared for their tax credits to be different in 2021. Not only has the maximum dollar amount for a child tax credit increased from $2,000 to $3,000 ($3,600 for children under six), but the first half of that will be disbursed monthly from July through December 2021.
Not all families qualify to receive a tax credit for dependent children. There are income limits for the child tax credit this year. If you think that you are eligible for the enhanced child tax credit but haven’t filed taxes in either 2019 or 2020, you need to give your information to the IRS.
How monthly child tax credits work
The major change in the child tax credit, other than the maximum amount available, is how and when you will receive child tax credits. Usually, the child tax credit is something parents claim on their taxes to reduce their taxable income.
For 2021, families with dependent children will receive the first half of the total child tax credit in the form of monthly payments. These are direct deposited, for those who have direct deposit enabled with the IRS, or sent via paper check or debit card.
The monthly child tax credit payments will start on July 15. Individuals with direct deposit will likely see the money almost immediately, while individuals receiving paper checks might have to wait.
The age of each child as of December 31, 2021, is how the payment amount is determined. Each child under age 6 as of that date qualifies the family for $300 per month in tax credits, while children aged 6–17 qualify for $250 per month.
The maximum total tax credit is $3,000 for older children and $3,600 for those under six. The amounts might be lower for people with higher income.
The second half of the child tax credit will be disbursed as a normal tax credit when families file their 2021 taxes early in 2022.
How do I sign up for child tax credits?
Individuals who have filed taxes for either 2019 or 2020 are automatically enrolled if their income and children qualify them. If you don’t file taxes, you can use the online non-filer sign-up tool to provide relevant information like your Social Security number and the bank account where you want the funds deposited.
Can I still opt out of monthly payments?
The deadline to opt out of the July 15 child tax credit was June 28, which means if you haven’t done so and your taxes and income qualify you for it, you’ll receive the payment automatically next week.
Some people might want to unenroll from monthly tax credits in order to get a larger tax refund when they file next spring. If so, you can unenroll from any and all of the monthly payments from August through December 2021. Use the IRS’s Child Tax Credit Update Portal to opt out of future monthly installments of child tax credits.