The Advanced 2021 Child Tax Credit
Many of you may have received a letter from the IRS regarding the Advanced 2021 Child Tax Credit. As part of the American Rescue Plan Act, an increase in the amount of the child tax credit is being implemented for 2021. The Act raises the child tax credit to $3,000 per child (or $3,600 for a child under the age of 6) from the previous $2,000 per child, subject to income limitations.
What is significant, however, is that the Act allows half of the credit to be received in advance on a periodic basis beginning in July 2021. Per the Treasury, $300 payments (depending on eligibility and income limitations) will be deposited into eligible taxpayers’ accounts beginning on July 15 and continuing every month thereafter on the 15th (or following the 15th if on a weekend or holiday) until the end of 2021.
The maximum credit is available to taxpayers with a modified Adjusted Gross Income (AGI) of:
- $75,000 or less for single taxpayers,
- $112,500 or less for head of household,
- $150,000 or less for married couples filing a joint return and qualifying widow(er)s and
- the maximum credit phases out for higher income taxpayers.
The IRS has created a website for taxpayers to provide updated child information or to opt out of receiving the payments altogether. In addition, it has issued guidance for taxpayers who are not required to file a 2020 tax return about how to file a simplified return to ensure that they receive the child tax credit as well as the third economic stimulus payment.
If you have any questions about the child tax credit and how it applies to your situation, please contact your BMSS professional or visit our website for our contact information at www.bmss.com.