While having children certainly adds to your financial responsibilities, a little bit of help is on the way. On July 15 of this year, the IRS sent the first set of the advanced Child Tax Credit (CTC) payments to families of almost 60 million kids. Want to learn more about if your family might qualify? We’ve got the details for you.
What’s a tax credit?
A tax credit is an incentive that may decrease the amount of taxes you owe. It can also be a credit granted in recognition of taxes already paid or a form of state support.
What is the Child Tax Credit specifically?
The Child Tax Credit (which has been around since 1998) is meant to benefit those who claim a qualifying child as a dependent. Since 2018, the CTC maxed out at $2,000 per qualifying child.
This year, as part of the Biden administration’s American Rescue Plan, the CTC has been expanded substantially and is expected to benefit about 39 million American households. Families who claim this advanced child tax credit can receive:
Eligibility for the new CTC depends on three factors:
What is a qualifying child for the new CTC?
The IRS uses the regular child tax credit rules:
How does your household income affect the advanced Child Tax Credit?
In simplest terms, the more income you make, the less you’ll get. The increase on the normal Child Tax Credit (meaning, the extra $1,000 or $1,600, depending on the age of your qualifying child) starts dropping once you pass the following income thresholds:
For every $1,000 you earn above these limits, your total payment is reduced by $50. For example, individuals earning $80,000 and claiming a qualifying child between the ages of 6 and 17 would have their payment reduced by $250, making them eligible to receive up to $2,750 in total across their payments.
Individuals earning $95,000 and claiming a qualifying child between the ages of 6 and 17 would be completely ineligible for the advanced CTC. Heads of household earning more than $122,500 and married taxpayers who file jointly (and qualifying widows or widowers) earning more than $170,000 are also at thresholds that make them ineligible for the advanced CTC, if they are claiming a qualifying child between the ages of 6 and 17.
However, it is important to note that families who are ineligible for the advanced CTC because they earn higher adjusted gross income are still able to claim the $2,000 per child tax credit, which is available to those making up to $200,000 ($400,000 for married couples filing jointly).
When and how will Child Tax Credit payments be made?
The payments are scheduled to go out monthly for six months starting on July 15th. If you have qualifying children between the ages of 6 and 17, you can receive up to $250 monthly per child. For children under the age of 6, you can receive up to $300 monthly per child.
If the math isn’t adding up to the full $3,000 and $3,600 maximums, then you found the catch. These monthly payments equal only up to half of what people are eligible for. Folks will have to claim the rest of the credit when they file their taxes in 2022.
So, should we have gotten a payment already?
A lot of folks who are eligible might’ve received an automatic payment on July 15, and can expect recurring payments on the 15th of each month through December (unless it’s a holiday or a long weekend).
If you qualify for the credit but didn’t receive the first payment yet, don’t fret! Here’s what you can do:
Direct deposit is the absolute fastest way to get your Child Tax Credit! Get your money quickly by depositing your CTC into your Zeta Joint Cards account. Simply add your Zeta account information in the Child Tax Credit Update Portal.
Zeta can also help you figure out how to handle your money once you receive it. Consider how you wish to allocate your funds. Do you want to funnel money towards purchases, pay down stubborn credit card debt, or use the funds for your kids’ allowance or other expenses? You can create new Goals and Rules in the app to automatically funnel money towards one or multiple places!
Phew, good job on making it all the way to the end! Hopefully you’re an expert on all things child tax credit-related now. If you have questions, concerns, queries, or just feel like saying hi, please reach out to us on social media or via email@example.com.
*The CTC also covers kids who will turn 17 in 2021.
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