Today is an important day for many Americans, as the American Rescue Plan (ARP) results are being seen in the form of a cash bank deposit from the United States Treasury. Although the child tax credit has been around in one form or another since 1997, important changes were made this year with the passage of the ARP that increased the credit and made the credit payable in monthly installments throughout the 2021 tax year beginning July 15^th.

The American Rescue Plan increased the Child Tax Credit from $2,000 per child to $3,000 per child for children between the ages of 6 and 17, from $2,000 to $3,600 for children under the age of six. All working families will get the full credit if they make up to $150,000 for a couple or $112,500 for a family with a single parent (also called Head of Household). Many families are automatically receiving monthly payments per child of $250 (over age 6) or $300 per child (under age 6) without having to take any action.

If you normally receive a tax refund through direct deposit, the IRS will use the account on file to deposit the credit amount. If you have made changes to your account or do not have bank account information on file with the IRS from a previous tax return, you can visit the IRS portal at: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal to update your information.

The number of eligible children reported on the 2020 tax return will be used to calculate the credit. Any discrepancies will be reconciled on the 2021 tax return filing. The IRS also gives taxpayers the option to opt-out of the payments if taxpayers wish to not receive the advance payments. This may be beneficial for a taxpayer that will owe a significant amount and ultimately be paying the credit back.

Please reach out if there are questions regarding your specific situation and the effects the child tax credit may have for the 2021 tax year.