The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit for the tax year 2021
The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit for the tax year 2021
May 27, 2021

For 2021, the Child Tax Credit is up to $3000 per qualifying child between the ages of 6 and 17 at the end of 2021 and $3600 per qualifying child under age six at the end of 2021. There are income limits and phase out income levels for the tax credit.

Tax filers can get an advance on up to half of the tax credit throughout 2021 in installments from July through December, and the remainder when they file their taxes in 2022. Filers are expected to be able to opt out of the advance payments if they prefer to get the money as a lump sum when they file their 2021 taxes. The monthly advance payments are expected to be $250 per month for children 6 to 17 and $300 per month for children under the age of six.

The advance payments will be determined based on the 2020 income tax returns. The IRS is setting up an online portal for qualifiers to be able to opt out of the advance payments. The IRS Commissioner, Charles Rettig, said the agency expects to have the portal up and running by July 1st and the monthly payments are also expected to start in July.

These credits will be reconciled when the 2021 income tax return is filed. This means families who didn’t receive the advance will be eligible for the computation of the credit when their 2021 return is prepared. Conversely, families with large income increases who are no longer eligible for the credit may have to pay back the advance when their personal income tax return is filed.

For more information on income levels and phase outs or how this will affect you, please call our office.



Treasury Circular 230 Disclosure

Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.

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