The IRS is notifying more than 36 million families by mail that they may qualify for the expanded child-tax credit (opens in new tab) coming in July, and also encouraging those who haven’t filed a 2019 or 2020 personal income-tax return to do so as soon as possible.
The Biden administration’s American Rescue Plan, passed earlier this year, increased the amount of the child tax credit for eligible families through the end of 2021 and allowed for advance monthly cash payments from July through December (opens in new tab). Families who don’t report any income or don't pay income taxes are also able to claim the credit for qualifying children.
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Under the expansion, eligible families will receive up to $3,600 per child under age 6 and up to $3,000 per child between ages 6 and 17 — including those who turn 17 before the end of 2021.
Up to 50 percent of the payments will be distributed in advance, meaning families could receive monthly checks of up to $300 or $250 per child starting on July 15.
The regular child tax credit, which still applies to families who do not qualify for the expanded credit, provides up to $2,000 per eligible child as a single credit at the end of the tax year, and does not provide a credit for children who turn 17 during the year.
The expanded credit phases out for taxpayers earning more than $75,000 (if single) or $150,000 (if married filing jointly). The expanded credit applies only to the tax year 2021, but Biden's pending American Families Plan hopes to extend the expanded credit through 2025.
Families can expect to receive a letter in the coming weeks notifying them of their tentative eligibility for the expanded child tax credit based on the taxpayer information the IRS has on file. Those who do qualify will also receive a second letter with their specific credit-payment amount.
What steps do I need to take to get child tax credit payments?
In most cases, taxpayers don’t need to take any action to claim the child tax credit, as long as the IRS has recent tax-return information on file.
However, those who didn’t submit a return for either 2020 or 2019, and who did not use the non-filers' tool to claim a stimulus check last year, should file tax returns as soon as possible.
This includes families who lack a permanent address and those who have little to no income and don’t usually pay taxes. In a change from the way the regular tax credit works, even those parents or guardians whose credit would exceed the amount of taxes they pay will receive the entire tax credit under the expanded plan.
The IRS also plans to launch an online calculator (opens in new tab) that families can use to determine their eligibility. Another tool, known as the Child Tax Credit Update Portal, will eventually allow people to opt out of advance payments and check the status of their credit. Those should be coming soon to the IRS website.