There have been important changes to the Child Tax Credit that will help families receive advance payments starting this summer. The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for only the 2021 tax year.
The expanded credit essentially means:
- The credit amounts will increase for many taxpayers.
- The credit for qualifying children is fully refundable. This 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 returns.
For the 2021 tax year, families claiming the CTC can receive up to $3,000 per qualifying child between the ages of 6 and 17 by the end of 2021. Any children under 6 will qualify for $3,600 per child. 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 and are being phased out for incomes over $150,000 for married taxpayers filing a joint return. This also applies to qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
Expect to start receiving payments on July 15th. Payments will continue on the 15th of each month until the end of December 2021. An online portal will be available to opt-out or add new babies born in 2021.
For more information, call Meadville Tax Service at (814) 333-2488.
