The American Rescue Plan Act offers some welcome relief for parents via the enhanced Child Tax Credit. Taxpayers will receive $3,600 for each child under age 6 and $3,000 for children ages 6 to 17. Here are some additional details.
Parents can choose to receive 50% in monthly installments from July to December 2021 and the other 50% as a credit on their 2021 taxes. This amounts to monthly payments of $300 or $250 per child expected to begin on July 15.
The full credit will be available for single taxpayers with income up to $75,000, heads of household making up to $112,500 and married taxpayers earning $150,000 or less. Those earning above these limits may still qualify for a reduced credit subject to additional income thresholds.
Even low-income households who don’t owe any taxes will receive the full benefit.
The credit will be based on 2021 income, but the IRS will use 2020 tax returns to begin issuing payments. If your 2020 earnings meet the income thresholds but you exceed them in 2021, you may need to pay back any advance payments you receive.
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