How much is the child tax credit for 2021?

If you want to know more about the latest child tax credit, keep reading.

President Joe Biden signed the refundable child tax credit for every qualifying child as part of the American Rescue Plan Act stipulation.

Designed to help taxpayers support their families, especially those hurt by the recent global pandemic, it is estimated that the new rules on child tax credit will reduce the number of American children living in poverty by 45%.

Update: As of writing, according to the (Internal Revenue Service) IRS website: Some advance payments of the Child Tax Credit were sent by mail in August instead of direct deposit.

Furthermore, this year 2021, you can get this child tax credit as an advance payment.

Ultimately, the tax credit intends to help low- to middle-income taxpayers with additional financial aid cause by the recent pandemic.

What is the child tax credit amount for 2021?

This year 2021, the child tax credit offers up to $3,000 per qualifying dependent child (18 years old or younger.) On the other hand, the credit increases to $3,600 if the child is six years old and below.

A tax credit may be one of the most exciting parts when preparing for your tax return. Essentially, a tax credit reduces your tax bill (dollar-for-dollar basis.)

Aside from that, the child tax credit is also refundable; that is, it can reduce your tax bill to zero, plus you might be able to get a tax refund check for anything left over.

Like stimulus check, you can receive your child tax credit via direct deposit or mail. Plus, you can choose to receive it in the form of advance payments every month starting July 15 or as a lump sum during taxes.

If your family is qualified, you will get up to $300 monthly for each under 6. While for each of your children aged 6 to 17, you get up to $250, and the second half will be available during tax season when you file your 2021 income tax return. These changes apply to tax for the year 2021 only.

Who qualifies for the child tax credit?

To qualify for the child tax credit, eligible families must:

• Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return,
• Your child who must be under age 18 at Dec. 31, 2021, and has a valid Social Security number,
• Single filers earning less than $75,000 per year, heads of household making less than $112,500 per year, and married couples earning less than $150,000 a year will be eligible for the full amount (the credit begins to phase out above those thresholds or for those higher incomes.)
• Eligible children are legal dependents who are U.S. citizens, U.S. nationals, or U.S. resident aliens.
• If you have a dependent who is 18 years old, they can qualify for $500 each.
• Dependents, or if your child is between the ages of 19 and 24, may qualify as well, but they must be enrolled in college full time.
• If you have a newborn baby in 2021, you can include them in the $3,600 tax credit. Even adopted child. Just ensure to update your personal information on the IRS Update portal.

If you want to know more about qualifying for the child tax credit, check out this useful IRS tool.

What to know about the advance payment?

The American Rescue Plan Act of 2021 allows parents to get monthly checks over the second half of this year to advance their 2021 child tax credit. Here are some things to know about how that works:

1. Parents can claim the full amount of their 2021 child tax credit when they do their 2021 tax return, or they can get half of that money now in cash and claim the other 50% later.
2. For those families who don't typically file a tax return, they can use the IRS' non-filer sign-up tool.
3. Payments will be every 15th of each month unless the 15th falls on a weekend or holiday. It will be via direct deposit, mailed paper check, or debit card.
4. If you qualify for a $3,000 child tax credit, you could get six $250 payments between July and December (for a total of $1,500) and then claim the remaining $1,500 on your tax return.
5. For those who qualify for a $3,600 child tax credit, you could also get $300 from July to December ($1,800) then claim the other half on your tax return.

How much is the child tax credit per month?

For 2021, the credit is $3,000 (children under age 18) or $3,600 (children under age 6) per eligible child. Moreover, it is fully refundable and can be received as advance payments.

This means starting from half of 2021, July; you will receive $250-$300, depending on which bracket your family will fall.

If you qualify, IRS will automatically enroll you for the advance payments. Hence, no need to take any additional action to get the credit.

Is the child tax credit going up in 2021?

President Joe Biden’s proposed American Families Plan would extend the credit to 2025 and make the credit permanently fully refundable.

Unlike last year, 2020, the child tax credit amounts to up to $2,000 per eligible child (under age 17) and is partially refundable.

This 2021 is fully refundable and can be received as advance payments- this is the new 2021 child tax credit feature.

The increased, fully refundable $3,000/$3,600 annual credits are provided only for the current year 2021. Unless extended by future legislation, the child tax credit will revert to its 2020 amounts and rules in 2022.

Again, qualified parents can choose to receive the credit money in monthly payments or get a one lump sum next year. In other words, your largest payment arrives next year, which is up to $1,800 per child. Until then, you get six smaller payments in total this year to start using right away.

So, if you opt for half of the money in monthly payments, mark your calendars as here is the payment schedule.

Month	Maximum payment per child aged five and younger	Maximum payment per child aged 6 to 17
July 15: First 2021 check	$300	$250
Aug. 13	$300	$250
Sept. 15	$300	$250
Oct. 15	$300	$250
Nov. 15	$300	$250
Dec. 15: Last 2021 check	$300	$250
April 2022: Second half of payment	$1,800	$1,500

Wrapping Up

With this newly advanced payment, you can make use of the money in several ways. First of all, you can save money.

Early saving could be a powerful tool for your children's future. So save what you can as early as you can make it work for your budget.

Initially, the child tax credit advanced payment idea is to bring you money sooner to meet expenses like rent, food, and daycare, which is why the checks are “advance payments.”

This can be ultimately helpful since kids are going back to school. In addition, you can use the money to facilitate some household or child expenses.

Moreover, you can also invest a part of it. For example, you can open a high-interest yield savings account or put the money to work for you via investing in stocks or mutual funds.

TIME and COMPOUNDING INTEREST are what's at play here. So this is why to start investing as early and often as possible.

Read more:

• Investing For Beginners With Little Money- 13 Easy Ways To Invest
• How to Start Investing Your Money Like a Pro – The beginner’s guide

Forget the excuses, the anxiety, and procrastination. It only takes 5 minutes to open an investment account. Lastly, that 5 minutes can be the difference between reaching financial independence 20 years earlier than your peers. Not to mention, for instance, you are building it for your child's future.

So, really, what are you waiting for?