What You Need to Know About the Child Tax Credit

The child tax credit is one of the most ambitious and expansive economic stimulus efforts to be launched by the U.S. government in recent years, offering monthly payments and tax credits to as many as 39 million households1.

The child tax credit has been lauded for its value in targeting financial support to children in poverty. The program has helped families subsidize the high costs of raising children, ranging from food, clothing, and other basic needs to childcare for working parents.

The program launched earlier this year, so many working families have questions about the child tax credit, including how much it is worth and how long it will last. With that in mind, here are some answers to questions you may have about this initiative:

Who is eligible for the child tax credit?

Almost all U.S. households with children under 18 can receive this tax credit. In 2021, the IRS reported that around 35 million households would receive tax credits for their children.

The payment amounts are reduced above a certain income threshold, ensuring that tax benefits are not distributed to high-income households. Your annual gross income determines your eligibility for the child tax credit.

How much are working families eligible to receive?

The credit for working families is up to $3,600 per child under six years old and $3,000 per child over six. Households with multiple children can receive a tax credit for each dependent child.

For families with two parents or guardians, the credit amount starts to decline as household incomes eclipse $150,000. For single-parent households, the high-income cap is $112,500. High-income households may only receive a percentage of the payment or may not receive anything at all if their annual income exceeds the program’s limits.

When can I expect to receive payments?

Families received the first of six monthly payments in July 2021. These six payments account for half of the total tax credit paid out in the 2021 tax year, with a final payment distributed in December 2021.

The second half of the payments will be paid out in a lump-sum tax credit when you file your taxes. Some families may not have received monthly payments because the IRS does not have their information. If that’s true for your household and you qualify for payments, you can still receive this money in the form of a credit on your tax return.

What if I haven’t received payments yet?

If you haven’t received payments but believe you are eligible, the IRS may be missing certain payment information to deliver your monthly tax credit. Visit the IRS child tax credit update portal to ensure the IRS has your banking and payment information or determine what steps you must take to get your payment processed and delivered.

You may also need to check your taxable income from your 2020 tax return to see if your income meets the eligibility requirements. The tax credit payments are based on your 2020 tax return, not your 2021 income, which may affect the amount you are eligible to receive.

Will the child tax credit continue in 2022?

As of January 2021, child tax credit payments have not been approved for the 2022 tax year, and the monthly payments paid out over the second half of 2021 are not expected to continue unless approved by Congress. 

An extension of the child tax credit has been proposed as part of a larger budget bill awaiting an official vote by the U.S. Senate, but it remains unclear whether it will be approved. Taxpayers are advised not to plan on these payments continuing, although the tax credit could be extended into 2022 and beyond.

Even if the child tax credit is not extended past 2021, the financial benefits of this tax break will continue to offer stimulus and relief for many households as they do their tax planning, file their tax returns, and receive refunds in the first few months of 2022. If you’re eligible, make sure you receive your compensation from this valuable credit and use that economic boost to improve your financial stability in the year ahead.

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1 ​​https://www.nytimes.com/2021/06/25/your-money/child-tax-credit.html

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