- There's been some big changes to the child tax credit
as part of the American Rescue Plan of 2021.
Some parents are auto-enrolled into this program
while others might have to take some action.
So here's what you need to know
about the changes to the child tax credit.
(light music)
Hey guys, it's Justine with the College Investor,
Investing and Personal Finance for Millennials.
So if you've taken advantage of the child tax credit
in the past, you'll want to take note
of the expanded tax credit
that is happening for the year 2021.
Here's what you need to know.
The first thing is is that the tax credit has increased
from $2,000 to $3,600 for children under the age of six
and $3,000 per children 18 and under.
Now, the credits are fully refundable.
That means even low income parents are eligible
for this type of credit.
Now, most taxpayers are also eligible for advanced payments
which are paid out in monthly installments.
Now, this begins mid-July of 2021.
So instead of receiving this as part of a deduction
on your tax return, you can actually get that refund amount
and that credit amount in monthly installments.
Another thing is this credit is now available
to all U.S. territories, including Puerto Rico.
So, one thing that you'll want to take note of
is the income eligibility has stricter criteria.
Those who file single will have earned $75,000 or less
or those making $150,000 jointly or less
will be eligible for this type of criteria.
Now, the older criteria had more wiggle room.
So if you were making $200,000 or less as a single tax filer
versus $400,000 for those filing jointly,
then you're still eligible for the old tax credit
of that $2,000 and then after that, it starts to phase out.
That's still available.
This expanded child tax credit will not be available to you
if you are still in those income thresholds.
You'll have to meet that stricter criteria income threshold
in order to be eligible for that new payment amount.
So who automatically receives
this advanced child tax credit?
So if you filed a 2020 tax return,
you've had no major income changes,
then you can expect to see those monthly payments paid out
to you through direct deposit
if you had that set up through the IRS.
Now, there are a couple of scenarios
in which you wouldn't automatically receive
this advanced child tax credit.
The first thing is is if your child was born or adopted
in 2021 or if you became the primary custodial parent
of a child in 2021, you didn't file a tax return in 2020,
and then your income was above those income thresholds
in 2020, but below the threshold in 2021.
Again, those new stricter income criteria,
$75,000 for singles and $150,000 for those filing jointly.
So if any of these changes has happened to you
and you think you are eligible
for this advanced child tax credit,
you can log onto the IRS website.
They have a new portal that is available
so that you can report any of these changes.
So this portal is going to be made available to you
so that you can quickly and easily report these changes
and get that monthly payout if you're eligible.
Now, if you're wondering whether or not you should opt out
of these payments, there's really only two scenarios
in which you should consider this as the alternative.
The first would be an increase in the income
which would make you ineligible
for that stricter income criteria,
then you should definitely opt out.
And then also if you have a decrease in the number
of children that are underneath your care for 2021.
There's obviously a lot of different tax credits out there
and this one is kind of a special circumstance
under the American Rescue Plan for 2021.
So if you're eligible, definitely take advantage of it
and report any changes on the IRS website
so that you can get those payouts.
Now, for more information on tax credits,
personal finance, saving, budgeting, investing, and more,
be sure to check out
all of our free resources at thecollegeinvestor.com.