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New IRS Advanced Child Tax Credit Payments


July 22, 2021

Dear Clients, Colleagues and Friends,

On July 15, 2021 the IRS made the first of six monthly advanced Child Tax Credit payments to eligible taxpayers. These payments are one of the provisions of the American Rescue Plan Act of 2021 and are part of the significant changes to the Child Tax Credit for 2021.   Below is a summary of the key changes to the Child Tax Credit for 2021:

  • The maximum credit has increased to $3,600 per child ages 5 and under and $3,000 per child from ages 6 to 17 as of December 31 2021.
  • The credit is fully refundable for 2021 regardless of a taxpayer’s income tax liability.
  • As mentioned above, the IRS will make advanced payments equal to 50% of the anticipated 2021 Child Tax Credit in 6 monthly payments beginning July 15, 2021.

A taxpayer’s 2021 Child Tax Credit will be reduced if their modified AGI exceeds the following thresholds:

  • 150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
  • $112,500 if filing as head of household; or
  • $75,000 if you are a single filer or are married and filing a separate return.

  The IRS will use either your 2019 or 2020 tax return to determine your eligibility for the advanced Child Tax Credit payments. An increase to a taxpayer’s 2021 modified AGI or decrease in dependents claimed may result in the taxpayer having an increased 2021 income tax liability. This is a significant change when compared to the treatment of the IRS stimulus payments that were issued by the IRS in 2020 and 2021 where the IRS did not require repayment of the stimulus payment if a taxpayers income increased beyond certain thresholds.    To avoid a situation where a taxpayer will receive advanced Child Tax Credit payments that exceed their calculated 2021 Child Tax Credit, a taxpayer may choose to unenroll in the monthly advanced Child Tax Credit payment program. In addition to a taxpayer unenrolling, married taxpayers will be need to have their spouse unenroll as well. If the spouse does not unenroll, the couple will still receive half of their monthly advanced Child Tax Credit Payment. To unenroll and to view other useful tools related to the Child Tax Credit, please visit the online Child Tax Credit Update Portal on the IRS website. Please note the deadline to unenroll for the next monthly advanced Child Tax Credit Payment is August 2, 2021.
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If you have any questions or need further information, please contact your Presti & Naegele professional directly, or dial 212-736-0055 for immediate assistance.

Presti & Naegele