Child Tax Credit: Frequently Asked Questions
Q: What is the Child Tax Credit?
A: The Child Tax Credit (CTC) is a decades-old support for families to help them afford the everyday expenses of raising children. It has historically been claimed at the time that a parent or caregiver files their taxes, and it has also been seriously flawed: millions of families did not previously qualify for the CTC because, ironically, they earned too little. The American Rescue Plan, signed into law on March 11, 2021, expands and improves upon the CTC for one year, making it available to the 23 million children—disproportionately Black and Latinx children—who were previously left out.
The American Rescue Plan also changed the way that the benefit will be available to families this year: instead of having to wait until they file their taxes in 2022, families will be able to get a cash benefit “advance” on the credit through monthly payments beginning July 15, 2021.
The expanded Child Tax Credit is a down-payment on ending child poverty and must be made permanent, and the Children’s Defense Fund is fighting hard to make that happen.
Q: How does the expanded CTC advance racial equity and reduce child poverty?
A: If implemented well, the American Rescue Plan is projected to cut child poverty in half in 2021, and the one-year expansion of the CTC accounts for the vast majority of the poverty-fighting effect of the bill. Its impact on racial disparities in poverty is even more dramatic: if implemented well, this change may cut poverty by 52 percent for Black children, by 45 percent for Hispanic children, by 37 percent for Asian American and Pacific Islander (AAPI) children, and by 62 percent for Indigenous children.
Q: What is the difference between the Child Tax Credit and a child allowance?
A: The inclusion of this robust expansion of the CTC in the American Rescue Plan is a critical step forward in making a guaranteed monthly child allowance permanent. A child allowance is a regular, direct, per-child payment that helps families afford the costs of raising children. A child allowance is available to all children, is easy to access, and is unconditional. In turn, it helps boost children’s health, increase family income, and reduce racial disparities. In order to truly create a universal child allowance, the expansion of the CTC would need to be improved upon so that it reaches all children and is permanent. The Children’s Defense Fund and our partners in the Automatic Benefit for Children (ABC) Coalition are fighting to make a permanent child allowance a reality.
Q: Who is eligible for the Child Tax Credit?
A: Most families with children qualify. Families in the U.S. and territories qualify for the newly expanded CTC. Married couples filing jointly making up to $150,000, single Head of Households making up to $112,500, and everyone else making up to $75,000 will receive the monthly payment of the CTC from July 15 to December 2021. In a very positive change from the current law, the expansion of the Child Tax Credit in the American Rescue Plan means that you do not have to be employed to receive the benefit; even families who have no income at all are eligible. If you have questions about your eligibility, visit: https://www.irs.gov/childtaxcredit2021 for more information.
Q: How much will I receive in Child Tax Credit payments?
A: The simple answer is that it depends on your income, how many children you have, and their ages.
The amount varies by income. Married couples making up to $150,000, families with a single Head of Household with income under $112,500, and everyone else under $75,000 qualify for the full Child Tax Credit. You will receive $3,600 per child under six years old and $3,000 per child age six to 17. The IRS is sending money to these eligible families in advance in monthly payments up to $300 per month for each child under six, and $250 per month for each child between ages six and 17.
So, for example, if you have one child, aged seven, you will receive $3,000 over the course of a year, or $250 per month from July to December 2021.
The monthly payment begins to reduce by $50 for every additional $1,000 of income earned. Higher-income families who previously qualified are still eligible for the $2,000 per child benefit for single Head of Household making up to $200,000 and married couples filing jointly making up to $400,000. Meaning, they will not receive less than what they previously did under current law.
The IRS is creating interactive online tools to help families determine their eligibility for the advanced CTC and to update their information (known as the CTC Update Portal), including bank accounts, changes in the number of children, filing status and more. Please check this website where the IRS will update information as soon as it becomes available.
Q: What if my child no longer lives with me, but I claimed them on my 2020 tax returns?
A: If you will not be eligible to claim the Child Tax Credit on your 2021 return (the one due in April of 2022), then you should go to the IRS website to opt out of receiving monthly payments. Receiving monthly payments now could mean that you have to return those payments when you file your tax return next year. If circumstances change again and you are entitled to the Child Tax Credit for 2021, you can claim the full amount on your tax return when you file next year.
Q: How do I apply for the Child Tax Credit?
A: Most families will receive the monthly payments automatically starting July 15 and will not have to do anything at all. If you filed your taxes in 2020 or 2019 or used the non-filer online portal last year to receive your stimulus payment, you will automatically receive the CTC. Families who haven’t filed taxes in the last two years and did not register for the stimulus payments will have to take some additional action. Using the CTC Non-Filer Sign-Up Tool, families can claim their CTC payments, and their stimulus payments that they are entitled to, if they fall under a certain income. For more information, click here.
Q: If I am eligible for the Child Tax Credit, when will I see my monthly payments?
A: Families will receive their first payment on July 15. At least 88 percent of children (65 million children in total) will receive payments automatically. Monthly payments will be delivered via direct deposit to the bank account that the IRS has on file or a check sent to the family’s mailing address on or around the 15th of every month.
Q: When will I receive the rest of my Child Tax Credit payment?
A: You will receive the second half of the Child Tax Credit payment when you file your 2021 taxes in 2022.
Q: What if I want to opt-out of monthly Child Tax Credit payments?
The IRS now has a “CTC Update Portal” for families to “opt-out” of the monthly payments, if they would prefer to have the cash benefit in one lump sum during tax time (when you file your 2021 taxes in 2022). Please use this link on the IRS’ website to unenroll from the advanced monthly CTC payments.
Families opting to receive the monthly payments will receive the other half of the credit when you file your tax return in 2022.
Q: Where will the IRS send me my money?
A: If the IRS already has your bank account information on file, you will receive the CTC advanced monthly payments through direct deposit, as you would receive a tax refund or have received recent stimulus payments. If you do not have a bank account at all, a paper check will be mailed to your address. For those who have new bank accounts or do not have a bank account on file with the IRS, you will be able to use the “CTC Update Portal” to update your bank account information. While this portal is now live, the bank update portion is not yet available. Please continue to check for regular updates.
Q: How will this affect my other public benefits?
A: The Child Tax Credit is not considered income for any family. It will not affect your Medicaid, SNAP/Food Stamps, TANF Cash Assistance, SSI, SSDI, Unemployment Insurance, Section 8, or Public Housing.
Q: Will I continue to get this Child Tax Credit payment every year?
A: Not currently. This is a temporary expansion of the CTC that applies only for tax year 2021. The Children’s Defense Fund is fighting hard to ensure that Congress takes additional action and passes legislation that includes a permanent expansion and other critical improvements to the CTC.
For more information on general Child Tax Credit information, use the White House’s website: https://www.whitehouse.gov/child-tax-credit/