Families should be aware of a few potential changes to their tax bill next year if they qualify for the enhanced child tax credit.
Next week, millions of families across the country will begin to receive monthly checks from the federal government when advance child tax credit (CTC) payments begin to hit bank accounts. Many families already have big plans for those payments, worth up to $3,600, or $300 per month, for each qualifying dependent under 6, and $3,000, or $250 per month, for each dependent aged 6 to 17. But they should be aware that they could also affect their 2021 tax bill in a few ways. For one, the six payments being made through the end of the year are advances of the credit, worth half of the full amount that parents will ultimately receive. When a parent files their 2021 tax return, he or she will claim the rest in a lump sum. The credit is refundable, which means that if a taxpayer doesn’t owe taxes, or owes less than the lump sum amount, they will receive the rest of the value of the credit in their tax refund.
