The advance Child Tax Credit pays parents up to $300 per month per child to help with the cost of raising them.
(CBS Detroit) — Most parents started receiving a sort of monthly stimulus check in July. The advance Child Tax Credit pays parents up to $300 per month per child to help with the cost of raising them. Unlike many other public programs, there are no limits placed on the use of that money. When it arrives, parents can use it for whatever their household requires. The Internal Revenue Service (IRS) is due to send out the next payment on August 13. How much will the next installment be? For parents of children up to age five, the IRS is paying $3,600 per child, half as six monthly payments and half as a 2021 tax credit. That changes to $3,000 total for each child ages six through 17. The IRS has made a one-time payment of $500 for dependents age 18 or fulltime college students up through age 24. Payments are based on the modified adjusted gross income (AGI) reflected on a parent or parents’ 2020 tax filing. (AGI is the sum of one’s wages, interest, dividends, alimony, retirement distributions and other sources of income minus certain deductions, such as student loan interest, alimony payments and retirement contributions.) The amount phases out at a rate of $50 for every $1,000 of annual income beyond $75,000 for an individual and beyond $150,000 for a married couple. The benefit is fully refundable, meaning it does not depend on the recipient’s current tax burden. Qualifying families receive the full amount, regardless of what they owe in taxes. There is no limit to the number of dependents that can be claimed. As an example, suppose a married couple has a four-year-old child and an eight-year-old child and showed an annual joint income of $120,000 on their 2020 taxes. The IRS sent them a monthly check for $550 in July and will send them another this week. That’s $300 per month ($3,600 / 12) for the younger child and $250 per month ($3,000 / 12) for the older child. Those checks will last through at least December. The couple will then receive the $3,300 balance — $1,800 ($300 X 6) for the younger child and $1,500 ($250 X 6) for the older child — as part of their 2021 tax refund. Parents of a child who ages out of an age bracket are paid the lesser amount. That means if a five-year-old turns six in 2021, the parents will receive a total credit of $3,000 for the year, not $3,600. Likewise, if a 17-year-old turns 18 in 2021, the parents should receive $500, not $3,000. An income increase in 2021 to an amount above the $75,000 ($150,000) threshold could lower a household’s Child Tax Credit. The IRS is expected to update the Child Tax Credit Update Portal to allow claimants to adjust their income and custodial information, thus lowering their payments. Failure to do so could increase your tax bill or reduce your tax refund once 2021 taxes are filed. Recipients can also use the portal to opt out of periodic payments in favor of a one-time credit at tax time. Eligibility requires that the dependent be a part of the household for at least half of the year and be at least half supported by the taxpayer. A taxpayer who makes above $95,000 ($170,000) — where the income limits phase out — will not be eligible for the expanded credit. But they can still claim the existing $2,000 credit per child. “Big changes to the way that the tax credit is structured,” says Stephen Nuñez, the Lead Researcher on Guaranteed Income at the Jain Family Institute, an applied research organization in the social sciences. (Nuñez studies cash welfare policy, that includes field work to answer policy-relevant questions about the social safety net.) “Much more generous, fully refundable, no longer any work requirement…” Monthly deposits of the Child Tax Credit started on July 15.
