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Here’s All That You Should Know About The Enhanced Child Tax Credit

Child tax credit eligibility

President Biden established the Enhanced Child Tax Credit  under the American Rescue Plan in March 2021. The enhanced tax credit will be rolled out as an advance on 2021 taxes in monthly installments. Read on to know about child tax credit eligibility, payment, and much more. 

Who Is Eligible To Receive The Maximum Credit?

You can receive full credit if you are a married couple who files taxes jointly and have children and an Adjusted Gross Income (AGI) less than $150,000, or an individual with a $75,000 Adjusted Gross Income and have children. 

The enhanced child tax credit will phase out if you earn more and cease for individuals earning $95,000 and married couples earning $170,000 filing jointly. 

If you earn more than this amount (less than $200,000 annually for individuals or $400,000 for married couples), you will still qualify for the regular child tax credit, which is $2,000 per child under age 17. 

Note – Parents with primary custody can receive the child tax credit. The rules to claim payments are similar to those governing the shared custody and child tax credit.

Child Tax Credit For Dependents

It is important to know that you can get a hefty tax break if you are paying someone to look after your children or a dependent while you work. Note that only the expenses of a babysitter, daycare, nanny, housekeeper, day camp, before and after school care programs, or care-related transportation are eligible for tax breaks. The maximum amount you can claim for one dependent is $8,000 and $16,000 for two or more. 

Eligibility For Dependents

In addition to the parents, dependents should meet certain requirements to qualify for enhanced child tax credit:

  • Must be below the age of 13, or
  • Must Be unable to care for themselves if 13 or older, or
  • Must be mentally or physically incapable of self-care even if their income was $4,300 or more

Note – Child must live with you for at least 6 months out of the year if you are claiming a new tax credit 

Child Tax Credit Amount

If your household is getting the full benefit, you may receive a $300 per month payment for children under 6. And you will receive $250 per month for children aged between 6 and 17. 

If you have dependents aged between 19 and 24 who are attending full-time college, you can receive payments for up to $500 each toward your total payment. However, that payment will be available when you file your taxes in 2022. If you are expecting your baby or adopted child to arrive before the end of 2021, he or she will qualify for up to $3,600.  

When Can You Expect To Receive The Payments?

The Internal Revenue Service (IRS) announced that the first payment would roll out on July 15, 2021. The IRS will make future payments on the 15th of each month unless it falls on a weekend or holiday. In such cases, payment will be made on the closest business day. You can expect subsequent payments on August 13, September 15, October 15, November 15, and December 15.

Should You Take Additional Steps To Receive Payment?

You need not take any additional steps to receive payments if you have filed your 2020 tax returns by May 17. If you didn’t file or are nonfiler, then you must file a one-time tax return. Note that you may not get the full monthly child tax credit payment, at least not right away, if you fail to file a tax return. 

Filing a tax return will help the IRS determine your income and the number of dependents in your household and calculate the child tax credit. You can file tax returns on IRS online portals that are expected to be launched by July 1. Note that the portal will allow only the nonfilers to provide relevant information to receive payments. 

The IRS is said to launch another online portal that allows you to correct, add new, or update your information. For instance, if your baby has arrived or will arrive in 2021, you can add this information. 

Can You Opt Out Of Enhanced Child Tax Credit?

Yes, you can opt-out of enhanced child tax credit and wait to receive the full amount in 2022. You can use IRS online portals to opt-out of the program. 

“Eligible taxpayers who do not want to receive an advance payment of the 2021 child tax credit will have the opportunity to decline to receive advance payments,” the IRS explained. “Taxpayers will also have the opportunity to update information about changes in their income, filing status, or the number of qualifying children. More details on how to take these steps will be announced soon.”

If you have any further questions on the enhanced child tax credit, visit the IRS website or call authorities at the IRS. 


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