The 2021 Child Tax Credit Expansion

father with child on shoulders turned away from camera
Jun 9, 2021 | Sara Khaki

The COVID-19 pandemic has been tough on parents and families. In response, President Joe Biden signed the American Rescue Plan Act of 2021 into law, which is a $1.9 trillion stimulus package to provide emergency economic relief. As part of this emergency relief, the IRS will expand the Child Tax Credit (CTC) for the 2021 tax year to assist families with children and other qualifying parties.

What Does the Child Tax Credit (CTC) Expansion Mean for You?

Parents and families who qualify for the CTC expansion will receive up to $3,000 per qualifying child under the age of 17 at the end of 2021. Families with children under the age of six will receive $3,600 per qualifying child at the end of 2021. Those who qualify will receive advance payments totaling up to 50 percent of the CTC starting July 15 through December 2021.

This enhanced credit for qualifying children is refundable, meaning those who have not earned income or do not owe income taxes can benefit from the CTC expansion. The credit also allows some individuals to receive part of their credit in 2021 before filing their 2021 tax return. This expansion is only for the year 2021.

Who Qualifies for Enhanced CTC?

The IRS and the Biden administration estimate that about 90% of families with children qualify for the monthly payment. The increased credits will be phased out for families with the following income levels:

  • $150,000 or more for married couples filing a joint return and qualifying widows or widowers
  • $112,500 for heads of households
  • $75,000 for all other taxpayers

How Can You Prepare for the 2021 CTC Expansion?

Before the advance payments begin, the IRS intends to open online child tax credit portals by July 1 to allow families and parents to make changes to any of their circumstances since the last filed taxes, such as income changes, new children, or child custody modifications.

Additionally, the IRS will open a second portal for those who do not have bank accounts or don’t usually file income taxes. This portal will allow eligible individuals to update their records and provide information to the IRS and secure their credits. The IRS is asking people to spread the information about the updated CTC to families without a permanent address to make sure they have an opportunity to receive their payments if they qualify.

Furthermore, the IRS recommends that families who have not yet filed their 2020 tax returns do so before the advance payments are issued to ensure their eligibility. If you have already filed taxes for 2020 and you know your eligibility, there is no further action required. For families who don’t want to receive the advance payments, the IRS has an option to decline the checks and save the full child tax credit for the next year.

Contact a Member of Our Team Today

The COVID-19 pandemic has been especially challenging for families and parents who have gone through changes this year. Fortunately, the Atlanta Divorce Law Group can help you navigate these changes and guide you through the process of obtaining the 2021 child tax credit expansion. It’s important to know how these changes may affect you and your family, and how they may benefit you in 2021. Divorce, child custody, and other family law issues can impact your credits. Contact our intake team today for more information.

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