The American Rescue Plan (“ARPA”) raised the maximum child tax credit in 2021 to $3,600 for each qualifying child under the age of 6 and $3,000 for each qualifying child between the ages of 6 and 17. Previously, the child tax credit was $2,000 for each qualifying child and 17-year-olds were not considered “qualifying children” for purposes of the credit. The full amount of the credit is available for single taxpayers with an AGI of less than $75,000, head of household taxpayers with an AGI less than $112,500, and married taxpayers with an AGI less than $150,000. Taxpayers with AGI greater than those amounts listed will be required to reduce the extra amount of the credit above the original $2,000 amount by $50 for every $1,000 of additional AGI beyond the phase-out amount.
Whereas in the past, a taxpayer claimed the benefit of the credit upon the filing of the tax return, the ARPA allows for these credits to be paid to taxpayers in advance. Beginning July 15th, taxpayers may begin receiving monthly payments for up to $300 / qualifying child under the age of 6 and up to $250 for each qualifying child between 6 and 17. Payments will be made based on the taxpayer’s most recently filed return with the IRS. The IRS has indicated that taxpayers may opt out from the monthly advance payment program and will have the option to claim the full amount of the credit when they file their 2021 tax return in 2022. Eligible taxpayers will receive a personalized letter from the IRS listing an estimate of their monthly tax payments set to begin July 15, 2021. For the most up to date information, please visit IRS.gov/childtaxcredit2021.