There have been impor­tant changes to the Child Tax Cred­it that will help many fam­i­lies receive advance pay­ments start­ing this sum­mer. The Amer­i­can Res­cue Plan Act (ARPA) of 2021 expands the Child Tax Cred­it (CTC) for tax year 2021 only.

The expand­ed cred­it means:

  • The cred­it amounts will increase for many taxpayers.
  • The cred­it for qual­i­fy­ing chil­dren is ful­ly refund­able, which means that tax­pay­ers can ben­e­fit from the cred­it even if they don’t have earned income or don’t owe any income taxes.
  • The cred­it will include chil­dren who turn age 17 in 2021.
  • Tax­pay­ers may receive part of their cred­it in 2021 before fil­ing their 2021 tax return.

For tax year 2021, fam­i­lies claim­ing the CTC will receive up to $3,000 per qual­i­fy­ing child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qual­i­fy­ing child under age 6 at the end of 2021. Under the pri­or law, the amount of the CTC was up to $2,000 per qual­i­fy­ing child under the age of 17 at the end of the year.

The increased amounts are reduced (phased out), for incomes over $150,000 for mar­ried tax­pay­ers fil­ing a joint return and qual­i­fy­ing wid­ows or wid­ow­ers, $112,500 for heads of house­hold, and $75,000 for all oth­er taxpayers.

Advance pay­ments of the 2021 Child Tax Cred­it will be made reg­u­lar­ly from July through Decem­ber to eli­gi­ble tax­pay­ers who have a main home in the Unit­ed States for more than half the year. The total of the advance pay­ments will be up to 50 per­cent of the Child Tax Cred­it. Advance pay­ments will be esti­mat­ed from infor­ma­tion includ­ed in eli­gi­ble tax­pay­ers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).

The IRS urges peo­ple with chil­dren to file their 2020 tax returns as soon as pos­si­ble to make sure they’re eli­gi­ble for the appro­pri­ate amount of the CTC as well as any oth­er tax cred­its they’re eli­gi­ble for, includ­ing the Earned Income Tax Cred­it (EITC). Fil­ing elec­tron­i­cal­ly with direct deposit also can speed refunds and future advance CTC payments.

Eli­gi­ble tax­pay­ers do not need to take any action now oth­er than to file their 2020 tax return if they have not done so.

Eli­gi­ble tax­pay­ers who do not want to receive advance pay­ment of the 2021 Child Tax Cred­it will have the oppor­tu­ni­ty to decline receiv­ing advance pay­ments. 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.

The IRS also urges com­mu­ni­ty groups, non-prof­its, asso­ci­a­tions, edu­ca­tion groups and any­one else with con­nec­tions to peo­ple with chil­dren to share this crit­i­cal infor­ma­tion about the CTC. The IRS will be pro­vid­ing addi­tion­al mate­ri­als and infor­ma­tion that can be eas­i­ly shared by social media, email and oth­er methods.

The IRS will pro­vide more infor­ma­tion about advance pay­ments soon.

Addi­tion­al infor­ma­tion can be found at IRS.gov/childtaxcredit2021