UPDATE: As of December 31, 2021 this tax credit expired and is no longer available.
On July 15, more than 30 million families are going to find some extra money in their bank accounts this year for the first advance payment for the child tax credit (CTC) as part of the American Rescue Plan Act that was passed by Congress earlier this year.
Parents with children 17 years old and younger who have a Social Security number are eligible for the new credit if the taxpayer(s) has an adjusted gross income below the following levels:
- $75,000 for individual taxpayers
- $112,500 for heads of household
- $150,000 for married taxpayers filing jointly, and widows/widowers
Those who qualify will receive up to $3,600 annually, or monthly payments of up to $300 from July to December, for children under 6 years old and $3,000, or up to $250 from July to December, for each child between 6 years old to 17 years old. The payments are paid monthly. The remaining six months of payments are paid in one lump sum payment when filers file their 2021 taxes next year.
While this sounds like wonderful additional financial support, these payments could be considered taxable income under IRS tax Code so filers should consult with an accountant in order to learn if they may have to pay taxes on these payments. Filers can opt-out of these payments using the IRS’s online portal on its website but must do so within specific deadlines laid out below:
|Payments||Unenrollment Deadline||Date of Payment|
|July 2021||June 28, 2021||July 15, 2021|
|Aug. 2021||August 2, 2021||August 13, 2021|
|Sept. 2021||August 30, 2021||September 15, 2021|
|Oct. 2021||October 4, 2021||October 15, 2021|
|Nov. 2021||November 1, 2021||November 15, 2021|
|Dec. 2021||November 29, 2021||December 15, 2021|
No doubt the monthly child tax credit payments will help a number of families; however, these payments may unknowingly increase the taxes they may have to pay next year. Knowing ahead of time if the payments will financially help or hurt your family can help eliminate an unwanted tax burden in 2022.
If you have questions about a divorce or custody case, call Jessica Sterle at (218) 722-2655 or complete a Consultation Intake Form.