This year’s child tax credit will send families who meet the requirements (and there are estimated to be nearly 49 million of them) a significant boost in their household budget over the next 12 months, with periodic payments starting in the second half of 2021.
The new rules surrounding the child tax credit mean that families with kids under age 18 could receive payments starting this summer. Equally important, families who pay little or no federal tax will receive the full amount they qualify for, a change from how the CTC had worked in the past, where lower-income families were excluded from the entire amount they were due.
So how is the new CTC different, who is eligible for a payment, and can parents who share joint custody of a child each get money this year? We have answers below. Plus, here’s more on the third stimulus check, who qualifies for that payment and what to know about the amended tax form.
Could parents who share joint custody of a child each get a payment?
With the first two stimulus checks, parents who aren’t married but share joint custody of a child could each receive a payment for the same child if they alternate years claiming the child on their taxes. With the new bill, Congress worked to close off that loophole for the third stimulus checks being sent out now.
Can parents who share custody of a child take advantage of a similar loophole with the new temporary tax credit? No, said Elaine Maag, a principal research associate with the nonpartisan Tax Policy Center. Only one person can claim the credit for a given child, Maag told us. And if you incorrectly claim a child this year, you may have to repay all or part of the payment next year.
Repaying any CTC overpayment is a departure from how the stimulus checks were handled. Typically, if you received an overpayment, you don’t need to send it back. (Here are situations where you’d need to return a stimulus check payment to the IRS.)
Can CTC payments be garnished to cover past-due child support?
According to the Congressional Research Service — Congress’ public policy research institute — the new law exempts the periodic child tax credit payments going out this year from offset for past-due child support. However, the amount you claim as a credit on your 2021 tax returns in 2022 could be subject to offset, the Congressional service said, similar to how stimulus payments claimed as a Recovery Rebate Credit could be redirected to cover an overdue debt.
How does the new child tax credit expansion work?
Before the changes this year with the American Rescue Plan, eligible families could claim a tax credit for their qualified children when they filed their taxes. The credit would reduce the amount of taxes they owed. That payment rule, however, excluded lower-income families who didn’t owe federal taxes and wouldn’t benefit from a tax saving with the credit.
With the new law, the credit is “fully refundable,” so qualifying families will receive the full dollar amount even if they don’t owe income taxes. Families will receive half the credit this year through period payments starting as soon as July and the second half of the credit in 2022 when they file their 2021 taxes during next year’s tax season. If, instead, you’d rather get one check, the IRS will let you choose to receive the full payment next year when you file. Here are more details on how the child tax credit payments will work.
Who qualifies for the expanded child tax credit?
The American Rescue Plan temporarily expands the CTC from $2,000 per child 16 years old and younger to $3,600 for children age 5 and younger and to $3,000 for children age 17 and younger.
The temporary expansion also makes the credit available to families in all US territories. Previously, the refundable credit was available to families in Guam, the Virgin Islands, the Northern Mariana Islands and Puerto Rico.
How much can families receive in 2021 and 2022?
Over 90% of all families with children — from lowest to highest qualifying incomes — will receive an average benefit of $4,380, according to the Tax Policy Center. Half the amount will go out this year periodically, starting this summer in roughly equivalent payments, and the second half next year when you file your taxes.
For more information on other funding, here’s how to estimate your third stimulus check, how to track your payment and what we know about a possible fourth stimulus check so far.
First published on April 3, 2021 at 4:15 a.m. PT.
