The amount starts phasing out for families with higher incomes — above $150,000 for married couples filing jointly or $112,500 for single parents who file as head of household. There are a number of online calculators you can use to see how much you can expect to get.
Why Is This Money Going Out Now?
What's being sent out this week is known as an advance child tax credit payment. In the past, families eligible for the child tax credit would have gotten it as a one-time lump sum when they filed their taxes. Now, half of the credit will be disbursed over six months, with a payment made on or around the 15th of every month from now until December. You get the second half of the credit when you file your taxes.
Do I Need to Sign up to Get the Money?
If you file federal taxes, you should automatically get the monthly payments. If you don't file taxes, you need to register on a website set up by the IRS. People who don't file taxes but received stimulus checks during the pandemic should automatically receive the payments.
"Families would be smart to confirm the account that the IRS has on file for them, and any other particulars that would be necessary to receive the credit," says Tim Flacke, executive director of Commonwealth, a social impact nonprofit. Those particulars include your most up-to-date bank account information and mailing address.
Can I Opt Out and Just Get the Whole Credit Next Spring?
Yes. The IRS has created a website where you can manage your payments. You need to set up an account and verify your identity before you can stop the monthly payments.
By opting out, you are not turning down the credit. You are just delaying when you get it. This may be a good option for people who are accustomed to getting a sizable credit on their tax bill in the spring and count on that to offset taxes due or to make a big purchase.
What if My Child Turns 18 in 2021, or if I Have a New Baby This Fall?
The expanded child tax credit covers children from birth to 17. If your child turns 18 in 2021, he or she will no longer be eligible. However, because the advance payments are based on earlier tax filings, you may still receive money for a child who is ineligible. Most people will have to pay that money back. The IRS does have a repayment protection program for lower-income earners.
If you have a baby anytime in 2021, that baby is eligible for the credit. The IRS says you will be able to make changes to your dependents, marital status and income on its website by late summer.
Will This Really Spur the Most Substantial 1-year Reduction in Child Poverty in US History?
Columbia University's Center on Poverty and Social Policy estimated that the expanded child tax credit and other measures in the American Rescue Plan could lift 5 million U.S. children out of poverty, cutting child poverty. That's not only because the amount of the credit is higher this year; it's also because in the past, families who earned very little were not eligible for the full amount.