What are the Advance Child Tax Credit payments?

Some of you may have recently received correspondence from the Department of Treasury indicating that you may be eligible for the advance payments of the Child Tax Credit starting in July as part of the American Rescue Plan Act of 2021. 

What are the advance Child Tax Credit payments? 

The Advance Child Tax Credit (ACTC) payments are early payments from the IRS of 50% of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return. These monthly payments will be made starting in July through December 2021 based off of the 2020 Income Tax Return. 

Who will receive the Advance Child Tax Credit? 

Parents who claim children under the age of six will receive $300 per child each month (Half of the full $3600 credit). Parents who claim children between the ages of six and seventeen years old will receive $250 each month (Half of the $3000 credit). 

Is there a way to delay payments until the 2021 tax return is filed? 

If you would prefer to not receive these advances, whether it is due to not knowing if you would qualify or you would prefer to claim it in full when filing your 2021 tax return, you will be able to unenroll or “opt out”. To do this, you will need to use the Child Tax Credit Update Portal on the IRS website. This will only be available until the first payment is disbursed. Once you receive the first payment, you cannot opt out. Once you unenroll, there is no way to re-enroll.

If you choose to take the child tax credit in advance, this will impact your individual tax filing and you may be required to pay some or all of these advance payments back to the IRS.

If I receive the ACTC payments but am over the income threshold, will I have to pay it back? 

There is a chance that these payments may be owed back if your individual income is over $75,000 or joint income is over $150,000. If you believe you might be close to this threshold, please reach out to your tax preparer to help plan out what will be the best option for you. 

If you are unsure about what to do related to the ACTC, you should contact our firm to determine the best course of action.