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Child Tax Credit

On March 11, 2021, President Biden signed the American Rescue Plan of 2021 into law. The American Rescue Plan provides financial relief to eligible families during the final phase of the COVID-19 pandemic through the expanded Child Tax Credit. The Credit is a refundable tax credit, up to $3,600 per child, that is expected to reduce child poverty by supplementing the earnings of families receiving the Tax Credit. The Internal Revenue Service (“IRS”) has been directed to provide advance payments of half of the Credit through periodic payments commencing in the second half of 2021. Families who qualify for the Credit will receive a monthly payment for each eligible child beginning in July 2021.

The American Rescue Plan temporarily increased the Credit from $2,000 to $3,600 for children under age 6, and $3,000 for children under age 18. The Credit will be reduced for married taxpayers earning more than $150,000 per year who file a joint return, $112,500 for heads of household, and $75,000 for all other taxpayers.

Monthly Credit payments will be paid by check, or if there is a bank account on file, the IRS will automatically deposit the money. Advance payments for 2021 are based on information reported on an eligible family’’ earlier income tax returns. The IRS also created an Advance Child Tax Credit 2021 online portal to assist families with verifying their eligibility to receive the Credit and the amount of the corresponding payments.

Those families electing not to receive advance payments of the Credit may opt out. Those who opt out of advance payments will be eligible to receive any remaining qualifying Credit when filing any 2021 tax returns.]

The Child Tax Credit is not new but has been expanded temporarily for 2021 pursuant to the American Rescue Plan. The Credit is particularly important for families in need of advance payments in 2021.