Small Japanese child on a picnic blanket eating fruit with his family in the background.

Millions of parents in the U.S. have already benefited from the temporarily expanded advance Child Tax Credit payment through the American Rescue Plan Act of 2021.

On July 15, payments rolled out for the largest child tax credit in history. Most families have automatically received monthly payments up to $250 or $300 per child per month since July.

Families have seen tangible results from this add-in to Congress’ third coronavirus stimulus package, which provides relief from lost jobs and financial instability stemming from the coronavirus crisis. The expanded child tax credit could help struggling families buy groceries, new shoes for school, offset the cost of childcare expenses and more.

Let’s go over the details of the child tax credit, including what you can do if you haven’t yet seen the payments in your bank account or mailbox.

What is it?

The enhanced child tax credit increased from $2,000 to $3,000 per child 17 and under (and $3,600 for kids under age six) for the 2021 tax year. The expansion also:

  • Temporarily allows 17-year-old children to qualify for the credit.
  • Removes the requirement that households must earn at least $2,500 to receive the credit.
  • Makes the credit fully refundable (meaning families can receive the full credit even if their tax liability is zero).
  • Allows families to receive up to half the credit through monthly payments from July to December 2021 (families can claim the remaining amount on their 2021 tax return).

 

Who qualifies? And how much child tax credit will you receive?

This income-based expansion reflects the adjusted gross income (AGI) on your most recently filed tax return. It phases out for individuals who earn $75,000 or more annually, $112,500 for heads-of-households, and $150,000 for married couples filing jointly. The maximum families can receive is $3,600 for children below age six and $3,000 for kids six through 17 years old.

For each additional $1,000 of AGI, the credit is reduced by $50 per child. In other words, individuals who earn $95,000 and couples earning $170,000 will not be eligible for the expanded relief.

However, families who have an AGI of $200,000 (or $400,000 if filing jointly) may qualify for the standard child tax credit of $2,000 per child.

2021 Child Tax Credit Calculation

To find out if and how much of the credit you may receive, read our step-by-step guide.

Image shows a visual depiction of how to calculate the amount of child tax credit a person could receive based on the ages of their children and their AGI. If single and making $75,000.00 AGI or less, head of household making $112,500.00 AGI or less, or married filing jointly and making $150,000.00 AGI or less -- families can receive is $3,600 for children below age six and $3,000 for kids six through 17 years old. For each additional $1,000 of AGI, the credit is reduced by $50 per child.

For additional information on the child tax credit, visit the IRS website.

Child Tax Credit Payments

The IRS has already made two rounds of payments, sent on July 15 and August 13. Four more payments have been scheduled for September 15, October 15, November 15, and December 15.

Payment Number Payment Date
1st Payment (already paid) July 15, 2021
2nd Payment (already paid) August 13, 2021
3rd Payment September 15, 2021
4th Payment October 15, 2021
5th Payment November 15, 2021
6th Payment December 15, 2021

 

Why haven’t I received my September Child Tax Credit?

If you haven’t received your payments, or if your payments are delayed, you can use the Child Tax Credit Update Portal to track pending payments that haven’t yet hit your bank account. You must create an account through the IRS to view the portal using a username or ID.me account.

If the “Processed Payments” section of the Update Portal says your payment was delivered, you may need to update your address and banking information.

Will the IRS continue sending Child Tax Credit payments next year?

So far, payments won’t continue into 2022 and are set to expire on December 31. However, President Biden wants to extend it to 2025 and turn it into a permanent fully refundable child tax credit through the American Families Plan. U.S. Rep. Richard Neal of Massachusetts has also introduced legislation called the Building an Economy for Families Act.

Ally customers: Look for the deposit labeled “CHILDCTC” to identify the payments when they land in your bank account.

Impact of the Tax Credit

The expanded child tax credit aims to give financially struggling parents, and families and communities of color, some relief from the impacts of the pandemic.

The Effects on Families and Communities of Color

The pandemic forced millions out of the workforce. School closures made some parents choose between working or educating their children, and lack of childcare made working at home nearly impossible for others. The expanded child tax credit aims to provide aid to families in these circumstances who may have lost income and struggled to stay afloat.

This portion of the COVID-19 relief package provides financial assistance for the families of more than 93% of children across the country. In addition, it reaches the lowest-income families that have not previously qualified for the credit due to being below the income floor to file a tax return.

The expanded credit also aims to reduce child poverty, which disproportionately affects children of color. By providing $300 monthly for each child under six and $250 for those six and up, the United States is tackling the problem. Families have reported using the money for:

  • Household supplies and necessities
  • Childcare or school-related expenses
  • Home repairs, utility bills
  • Saving for the future

The positive effects of these funds provide more than just immediate relief. Underserved and underprivileged kids have a greater chance of graduating high school, going to college, and staying away from harmful substances. In addition, an additional $3,000 per year for a child under five can result in approximately 19% greater income in adulthood.

Relief for Parents and Families

As families continue to navigate the stress of the pandemic, The American Rescue Plan and its expanded advance Child Tax Credits, has offered a small yet impactful wave of relief and will continue to do so over the next few months.

Families, we’re here to help you make the most of every dollar. Explore Ally Bank’s Online Savings Account.

*This article is not meant to deliver tax advice. Please consult with a tax professional for guidance and questions.