What we know about the child tax credit for 2021

The new credit is for 2021 ONLY. It will be a $3,600 credit for each child under age 6, and a $3,000 credit for children ages 6 to 17.

Half of the credit will be paid monthly from July thru December, $300 in each month for children under age 6 and $250 for each child aged 6 to 17. The other half will be claimed on the filing of the 2021 tax return.

There are limits on the credit based on your Adjusted Gross Income (AGI) for 2021. You get the full credit for head of household taxpayers if your AGI is $112,500 or less. For married filing joint, the AGI limit is $150,000.

The money will be paid out based on your 2020 tax return that you should have just filed.

This credit is NOT like the stimulus money. Over- or under-payment is reconciled on your 2021 tax return. Basically, this means that if you qualify for the credit based on the 2020 tax return and then you make too much money to claim it when you file your 2021 tax return, you’ll need to pay it back (or your refund will be reduced).

It’s our recommendation that you add direct deposit information to your 2020 tax return if you haven’t filed it yet so that payments are direct deposited. And keep track of the payments you receive!!

The IRS should be setting up a portal by July 1st so that people can update their information. The portal should allow you to update your number of children (including birth), marital status, change in income from 2020 to 2021, and it should include an option to opt out of the prepayments.