Tens of millions of families across the country will begin receiving the first payment of the expanded child tax credit today according to the Internal Revenue Service and the Treasury Department. The checks were sent out on Wednesday with the plans for payments to begin on July 15.
The payments were approved as part of the $1.9 trillion stimulus package signed into law in March by President Joe Biden. The vast majority of families — roughly 39 million households covering 88% of children — will get the credit automatically because they have filed 2019 or 2020 returns claiming the credit.
The full enhanced credit will be available for heads of households earning $112,500 and joint filers making up to $150,000 a year, after which it begins to phase out. For many families, the credit then plateaus at $2,000 per child and starts to phase out for single parents earning more than $200,000 or for married couples with incomes above $400,000. It also makes the CTC “refundable,” which means that people can get it even if they don’t owe federal income tax, which will increase the number of low-income households that qualify for the payments.
Eligible families can receive a total of up to $3,600 for each child under 6 and up to $3,000 for each one age 6 to 17 for 2021. That’s an increase from the regular child tax credit of up to $2,000 for each child up to age 17.
Eligible families will receive half their credit — up to $300 a month for each child under age 6 and up to $250 for each one ages 6 to 17 — on a monthly basis from now through December. The payments will be made on the 15th of each month unless it falls on a weekend or holiday.
The remaining portion of the tax credit can be claimed when filing taxes for the 2021 tax year.
Families who want to receive the payment as a lump sum can opt-out of the monthly installments at the portal. According to the IRS, more than 35 million families were sent the first round of payments, while about a million have opted to take the funds as a lump sum. The others have filed for extensions or have issues with their returns.
Parents of nearly 60 million children will receive the monthly payments through direct deposit, paper checks, or debit cards, according to the agency. Some 86 percent of payments will be sent via direct deposit.
The IRS determines the payments by the most recent tax filing for families, therefore a family’s 2020 tax return is the most recent data available to the agency, which wouldn’t include children born or adopted in 2021.
However, the IRS says it will add the ability to update your information to include a child born or adopted in 2021 through its Child Tax Credit Update Portal.