TEMPLE, Texas — There has been a lot of talk about the Child Income Tax Credit that just went into effect on July 15. What does it mean for parents out there, and who will be seeing the money?
The American Rescue Plan institutes a fully refundable child tax credit for 2021, increasing the maximum amount eligible parents can receive for simply having a qualifying child dependent to $3,000 per child ages 6 to 17 per year, or $250 per month.
It will be even more for children under the age of 6. That credit equals $3,600 annually, or $300 per month.
“Starting July 15 families will be able to get advanced payments of the child tax credit. Half of the credit will be sent as a monthly payment, and the other half can be claimed when you file your 2021 return," Certified Financial Planner Neil Vannoy said.
So when that money reaches accounts, that will be putting money right into parents' pockets for the entire second half of 2021. Congress is considering extending this into the future but perhaps with caveats.
Vannoy said for this year, the remainder of 2021, there are no strings attached.
"The child tax credit is $3,000 per qualifying child, or $3,600 if your child is 5 or younger. This amount is fully refundable, so you qualify even if you have low or no earned income," he said.
And something else you should know: If a parent doesn't want those monthly payments but instead wants the entire amount credited during tax season at the beginning of next year, they'll need to opt out.
"The IRS will use the information they already have to determine if you qualify and will automatically enroll you for the advance payments," Vannoy said.
The credit's overhaul will deliver cash to 93% of American children and cut the child poverty rate by half, according to Columbia University. Democrats are hoping to make the credit enhancement permanent.
Vannoy said that you should consult your tax preparer with any questions.