Child Tax Credit: Everything You Need To Know Before the July 15 Rollout

The Advance Child Tax Credit is scheduled to start distributing its first payment on July 15. Although tax credits for dependent children are available every year, this year as part of the American Rescue Pant stimulus relief bill, the Biden Administration increased the amount available to families with children under 6 years of age to $3,600.

Also unique to this year’s tax credit is that it is that everyone can receive it. This means that even if you haven’t filed taxes, do not plan to, or do not make enough income to receive a tax return, you are still entitled to the full benefit amount. 

The child tax credit is an advance tax credit that can either be received all at once next year during tax time or in monthly payments beginning in July and ending in December. The full benefit amount will depend on the age and number of your dependents. 

There are two distribution options.

1. Lump Sum: If you choose to receive a lump sum payment all at once, you will have to wait until next year at tax time in order to claim it. 
2. Monthly Payments + Lower Lump Sum: Unless you have changed this manually (which we will explain how to do) you will start to receive monthly payments of $300 starting July 15 and lasting through December amounting to $1,800. The other $1,800 would then be claimed next year during tax time. These figures represent the full eligible amounts.

The IRS has set up an online portal for you to manage where you want your money to be deposited. If you are automatically set up for payments, the money will be directly deposited into the same account your tax return was. If you would like to change this information, you will need to use the portal to enter your bank routing and account numbers.

To use the child tax credit direct deposit portal, simply sign in with ID.me, scroll down and click “Manage Payments.” From that landing page, scroll down to the bottom and click “Manage Advance Payments” and make the necessary updates.

The amount of money you receive depends on your income and the number of age-qualifying dependents. The income thresholds are $75,000 filing single and $150,000 filing jointly. If you meet the income requirements, you will then receive $3,600 for every dependent child under the age of 6 and $3,000 for every dependent child aged 6-17. 

If you are divorced or separated, only one parent can claim the credit. The qualifying child must live with you for at least 6 months and one day in order for you to be able to claim the credit. If you or your child are not U.S. citizens, you will not qualify. Social Security Numbers or Individual Taxpayer Identification Numbers are also necessary.

Yes. Babies born or adopted in 2021 will be eligible for the credit, but parents will need to wait until next year during tax time to claim the credit.

Parents of children aged 18 and full-time college students aged 19-24 can receive up to $500 per child. The same income thresholds still apply.

The IRS has set up two online portals — one for non-filers to upload their information for payments and another one labeled “Manage My Payments.” Through the Manage My Payments portal, you can choose to opt-out, update your bank information or check to see if you are eligible to start receiving payments.

Once you enter the portals, you will need to verify your information. The IRS has partnered with third-party company ID.me, and you will be redirected to their application in order to input identify verifying documentation. This will include your social security number, birth date, name address, etc. In addition, you will be asked to scan both sides of your drivers’ license and have your face scanned for a facial recognition comparison.

You can opt out any time this year to stop receiving your monthly payments. This means you can receive your first payment in July, then change your mind and opt-out for the remaining monthly payments. However, the IRS says you must opt-out three days before the first Thursday of the month in order to not receive the next month’s payment.

In short, it will not affect 2021 taxes for most families. The credit is fully refundable, meaning even if you do not pay taxes you can still receive it. It also means you do not have to pay it back.

The only instance where it would affect your taxes next year is if your income were to increase to such a level in 2021 that it exceeds the income thresholds. The child tax credit is based off of your 2020 taxes, meaning that when you go to file your 2021 returns, an income change could set off a tax bill. If this is the case, you will be required to pay the credit back.

The majority of families will not need to pay anything back or owe anything on next year’s taxes.

As of right now, the child tax credit is set to expire at the end of 2021. There has been a recent push by the Biden administration to extend it to 2025, but nothing has been official yet.

There are two main reasons your child tax credit could be lower. One is that you or your spouse if filing jointly surpassed the income thresholds.

Another is that this year’s child tax credit will be distributed in monthly payments for half the amount in 2021 and the other half in a lump sum in 2022. 

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Last updated: July 12, 2021