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Three Things to Know About Expanded Child Tax Credit Payments

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Millions of U.S. families with children will receive expanded Child Tax Credit payments starting in July 2021.

The American Rescue Plan enhances aspects of the Child Tax Credit. In 2021, the maximum Child Tax Credit is $3,600 for children younger than age 6 and $3,000 for those between 6 and 17.

Here are three things to know:

  1. The IRS will use 2019 or 2020 tax returns to estimate advance amounts for the Child Tax Credit. The payments are income-based and would start to phase out for individuals earning more than $75,000 a year for a single filer or $150,000 for those married filing jointly.  Families with children eligible for the expanded Child tax Credit who did not have to file taxes in 2019 or 2020 because they had too little income, or who did not sign up to receive stimulus checks from the IRS, need to sign up for the payments via the IRS website.
     
  2. The IRS will distribute Child Tax Credit payments monthly from July to December 2021. Half of the child tax credit will come in the form of these advance payments. Taxpayers will claim the remaining half when filing their 2021 income tax return.
     
  3. Families of ABLE-eligible individuals may want to consider saving all or a portion of their Child Tax Credit payments in an ABLEnow account. Although these advance payments are not treated as income by most federal, state and local programs, funds not spent within 12 months may count as a resource and could impact eligibility for means-tested programs such as Medicaid and Supplemental Security Income (SSI). If funds are not needed immediately, putting the payments in an ABLEnow account provides flexibility and an opportunity to invest for the future.

Additional details on Child Tax Credit payments are available on the IRS website.

Seek the advice of a professional on maximizing the benefits of an ABLE account. Eligible individuals may open an ABLEnow account online.

Last updated June 28, 2021

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