The government has introduced a number of temporary changes to its 2021 COVID-19 relief plan that it hopes will further reduce child poverty and help working families recover more quickly from financial hardship. These changes will directly benefit WSECU members and their families, as many will be eligible for automatic monthly refunds and reduced tax bills.
Larger credit, wider age range
As part of the $1.9 trillion American Rescue Plan Act of 2021, the child tax credit has been expanded to offer a refundable credit of up to $3,600 per child for qualified families — up from $2,000 last year.
It has also raised the maximum age of qualifying children from 16 to 17, widening the pool of families that may receive assistance.
What else has changed?
In addition, those eligible now have the option to receive half of their refund in advance in the form of six monthly payments, up to a maximum of $300 per child. This is a change from 2020, when the credit was given only in the form of a tax refund.
The first payments are scheduled to arrive on July 15, 2021, and will continue through December 2021, with the remaining amount delivered as a tax refund.
The benefit is now also fully refundable and requires no minimum earned income. This is especially helpful for low-income families that made less than last year’s limit of $2,500. It means tax filers with no earned income or owed taxes will still be eligible to receive the full credit as a cash refund.
Are you eligible?
Parents of children ages 6 to 17 can receive a credit of up to $3,000 per child, while parents of children under 6 are eligible for up to $3,600 in assistance. To qualify for the full benefit, you must fall within one of these categories:
- Individual earning up to $75,000 adjusted gross income (AGI)
- Head of household with an AGI up to $112,500
- Joint filers earning up to $150,000
You may be eligible for a partial refund even if your earnings exceed the above thresholds. For every $1,000 above the maximum, the available credit will be reduced by $50. If, for example, you’re an individual making $80,000 who has a 10-year-old child, the maximum payment of $3,000 will be reduced by $250 ($50 x 5), to $2,750.
What you need to do
If you’re among the more than 36 million families that are likely eligible for the child tax credit, you may have already received a letter from the IRS explaining the nature and amount of your benefit.
The advance monthly checks — their amount to be determined by your most recent tax return — are on track to be disbursed automatically starting July 15 and will arrive via direct deposit, paper check or debit card. If you filed a 2020 or 2019 tax return and provided the IRS with your current mailing address or direct deposit information, you won’t have to do anything.
You can visit the IRS's website to update your information if your address or direct deposit details have changed. If you don’t want to wait to receive a check by mail, you can also provide your direct deposit information to have the funds electronically deposited into your account.
If you prefer to opt out of the monthly payment plan altogether and instead claim the full child credit on next year’s taxes, the U.S. Treasury is building an online portal to facilitate that option. Once it’s live, the portal will also allow you to check your family’s eligibility and the status of your payments, as well as update your income information and number of qualifying children.
In the meantime, if you have questions, you can visit the IRS's FAQ page to find the latest information on the 2021 child tax credit.