What to Know About the Child Tax Credit
- June 21, 2021
- By: Greenpath Financial Wellness
Families with dependent children are about to receive advanced payments as part of the American Rescue Plan’s expansion of the Child Tax Credit.
On average, families who claim the Child Tax Credit for 2021 will receive up to $3,000 per qualifying child per year, paid out in monthly installments. A qualifying child is between 6 and 17 years old at the end of 2021. For those with a qualifying child under age 6 at the end of 2021, they will receive $3,600 per year, paid out in monthly installments.
The official dates for the 2021 monthly direct cash payments are: July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15.
Families are eligible to receive advance Child Tax Credit payments based on their 2020 tax return or 2019 tax, families generally will receive those payments automatically without needing to take any additional action.
- To know the full impact for each family, the IRS provides a general overview of the Child Tax Credit along with eligibility information.
- This FAQ Guide provided by the IRS looks at the details of the program.
- The “Child Tax Credit Non-Filer Sign-Up Tool” on the IRS website is for use by taxpayers to report qualifying children born before 2021.
WHAT SHOULD YOU DO WITH YOUR ADVANCED CHILD TAX CREDIT?
With this change in how families are able to receive this tax credit, it can be a great time to start some new financial routines. Take our FREE online course to understand the following:
- Determine your IRS eligibility
- Learn how to receive or opt out of your payments
- Consider strategies to reach your financial goals
Sign into the LearningLab and search “tax credit.”
Your Family Budget
Families set to receive the advanced monthly payments starting in July might be weighing what to do with the money. How will the funds best be used? Will you use the payments for immediate family needs? Put it away for any family emergencies that might come up?
A good place to start when it comes to assessing how to use the advanced child tax credits is to look at a family’s entire financial picture. Families might consider asking the following questions:
- How much does the family have in emergency savings?
- Does the family have any high-interest debt (credit cards, loans, other debt) to pay off?
- What other major expenses are coming up and how will the family pay for them?
- Does the family have the need for any upcoming home repair, car repair, medical expenses?
The Power of a Plan
Setting a plan can be helpful when it comes to managing these advanced funds.
Advanced payments can be used to make a significant difference in a family’s entire financial situation. It could be a way to make a major dent in credit card debt, or a way to be able to build some family emergency savings that many struggle to build throughout the year with a paycheck.
To get you started, GreenPath offers a simple spending plan worksheet to jump-start the family budgeting process:
It Starts with a Call
To help understand your best options, connect via a call to GreenPath for a free financial counseling session. As an example, some families might want to opt-out of the scheduled advanced payments and instead receive one lump sum child tax payment in 2021. If that payment plan makes sense, people will need to select that option in the IRS online portal.
What’s the best path for your family? When you contact GreenPath, you will be guided through a process to assess your financial picture and create an action plan to address your specific situation when it comes to managing the advanced payments.
GreenPath’s certified, caring counselors listen with respect, offer advice and information, and work with you every step of the way.