The Child Tax Credit has existed since the 1990s but just this year, President Joe Biden put forth the Advanced Child Tax Credit as part of the American Rescue Plan.
So what are the changes?
The 2021 Child Tax Credit allows people to get an advancement of half of the annual child tax credit. Anyone that has children under the age of 17 can qualify for some form of child tax credit. The younger your children, the more child tax credit you get. If you have a child under six, they can qualify for an annual $3,600 of child tax credit provided you meet certain requirements.
For children between the ages of six and 17, they can qualify for $3,000 of child tax credit annually.
Now, the 2021 Child Tax Credit stipulates that you can get half of that advanced to you which would be $1,500.
How is it paid?
The monthly advance is paid in July through December of this year. This might show up in your direct account or as a check in your mailbox.
Whether you get it now or later, you'll get the whole credit. It's just a matter of how you choose to get it. You may opt out of the advanced child tax credit or get it all on your tax return.
Getting a Refund on Your Tax Returns
In 2020, the child tax credit was meant to reduce the tax that you owed. It came straight off of your liability or the tax that you owed. If you didn't owe that much (say you only owed $2,000 in liability and your child tax credit was $3,000), they would not allow you to get a refund of the extra $1,000.
Now, in 2021, they will allow you to get the full credit which means you can be refunded any amount of credit that you didn't need. Know that you don't have to do this alone because the tax code can be very complicated. Nobody should try to wade through any part of it by themselves. It’s wise to ask for help from tax experts who can help you with this.
If you want to learn more about the 2021 Child Tax Credit, check out 055: Understanding the 2021 Child Tax Credit