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The American Rescue Plan Act (Act) made key changes to the Child Tax Credit (CTC) for taxpayers. Credit amounts increased, the credit is fully refundable, and now includes children who turned 17 in 2021. Also, as a result of the Act, starting July 15, the IRS began making advance monthly payments totaling half of the estimated CTC to taxpayers. The other half of the CTC will be taken on the taxpayers’ 2021 Forms 1040.

The annual maximum CTC is $3,600 per qualifying child under the age of 6 at the end of 2021, and $3,000 per qualifying child ages 6 – 17 at the end of 2021. To qualify, the child must live with the taxpayer in the United States for more than half of the year.

The maximum credit is available to taxpayers with a modified 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 jointly and qualifying widowers
  • If a taxpayer’s AGI exceeds the applicable threshold above, the credit will start to be phased down

The first round of payments was issued on July 15, 2021. If you want to continue receiving these monthly payments, no action is required! If you do not want to receive these advance payments and prefer to utilize the credit on your 2021 Form 1040, you will need to unenroll via the IRS Portal on or before Monday, August 2, 2021 for the August 13 payment. You do not need to unenroll each month.

Please click on the link below for more details and to access the IRS Portal.

Please contact your trusted Bodine Perry advisor if you have any questions or need assistance with this process.