Child Tax Credit 2021: Eligible or Opt-Out?
Many Americans received their first advance payments from the child tax credit program on or around July 15, 2021. These payments were passed as part of the American Rescue Plan as an advance on the child tax credit for the 2021 tax year. However, some recipients may be surprised to learn they may not be eligible for the payments already received because of changes in taxable income for 2021 or children who turned 18 during 2021.
Calculating the Credit:
The IRS has calculated eligibility and monthly payment based on the most recent tax return of the filer which was either December 31, 2020 or December 31, 2019 for those on extension for the 2020 tax year.
The child tax credit for 2021 is $3,600 per child up to age 6 ($300 per month) and $3,000 per child ages 6 to 17 ($250 per month). To be eligible for the full credit, singles must have adjusted gross income of up to $75,000 and married couples who file a joint tax return must have income of less than $150,000. People who earn more could get a partial benefit until it phases out. Those who are not eligible for the full or phased child tax credit can still claim $2,000 per child — the previous amount available — as long as adjusted gross income is below $200,000 for singles and $400,000 for those married filing joint returns.
The IRS now has given taxpayers the ability to opt out of future child tax credit payments using their online portal: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal The next deadline to opt-out of future payments is August 2nd to ensure the August 15th payment is not received or August 30th to ensure the September 15th payment is not received.
In the event you did opt-out of the credit, but later learned that you qualify for the credit, you will still be able to claim the credit on your 2021 tax return.
If you continue to receive the child tax credit advance payment, but were not eligible for it, you will be required to repay the advances received. Repayment will be made with either a reduced refund on your 2021 tax filing or a payment to the IRS depending on your tax situation.