Things You Need To Know About the Child Tax Credit

As a parent, one of your top financial goals is to ensure the best possible future for your children. With the Child Tax Credit (CTC), you can receive monetary support for your children. This article will explore how the 2021 Child Tax Credit works and how you can opt-out of monthly payments to receive the full credit.

What Are Child Tax Credit Payments?

The 2021 Child Tax Credit offers up to $3,600 per child under the age of 6 and up to $3,000 per child aged 6 to 17. If the credit exceeds the taxable amount for the year, the family can receive the excess as a refund. Monthly payments are sent starting in July, rather than a one-time payment at the time of taxation.

Previous legislation provided for a child tax credit of up to $2,000 per child under the age of 16 and a maximum payment of $1,400 per child. These parameters will be applied again from 2022 to 2025. Dependents below 18 years, as well as those between 19 to 24 and studying full-time in college, can each receive up to $500 in non-refundable credit. There is no limit to the total amount of credit that taxpayers with multiple children can receive.

How Did Child Tax Credit Payments Come About?

The CTC was first established in 1997 as part of the Taxpayer Assistance Act. At the time, the non-refundable credit was $400 per child below the age of 17. The amount increased by $100 the following year and was still non-refundable.

In 2001, the tax credit was made refundable in conjunction with the Earned Income Tax Credit (EITC), which created a limit for earnings reaching $10,020 for those with two children. The threshold was at $10,000 for receiving income subsidies.

In 2012, the American Taxpayer Relief Act of 2012 increased this tax credit to $1,000 per child, and the threshold for payment was reduced to $3,000.

The Tax Cuts and Jobs Act of 2017, which became effective in 2018, increased the CTC to $2,000 per child. The limit of the payable amount was $1,400. Dependents who were not eligible for the credit could qualify for non-refundable credits of up to $500. By 2025, children below 17 will only be refunded up to $1,000.

This year, families can receive $3,000 per child aged 6 to 17 and $3,600 for those below age 6.

Reasons for Opting Out of Monthly Payments

Some parents opt ​​out of receiving their monthly CTC payments. You may be wondering why, when monthly credits seem like a practical way to support your family. These are some cases in which you should consider opting out of monthly payments:

  • Preference for one large payment: Your family needs the full credit to save up for a big expense or to pay off an outstanding debt.
  • Changes in household circumstances: You may be undergoing separation, divorce, or alternating custody of your child, which requires you to change your tax information.
  • Concern with overpayment: You might be returning to work, getting a new job, or your child may be aging out of the bracket and you don’t want to worry about receiving an overpayment from the IRS.

How To Opt-Out of Monthly Payments To Receive Full Credit

If your family’s circumstances have changed, you can opt-out of monthly payments before the next deadline. Here are the steps to unenroll:

  1. Go to the Child Tax Credit Update Portal and click the Manage Advance Payments option. Sign in using your IRS or ID.me account information.
  2. If you don’t have an account yet, sign up using your email address, photo identification, and Social Security number. Then, follow the steps for verification on your device.
  3. Once you’re logged in, you’ll be able to view your eligibility details and the next deadline for opting out. You will no longer receive monthly payments. 

You will still receive the same CTC amount you are entitled to after opting out, provided your income meets the eligibility requirements. After unenrolling, you won’t be receiving payments until after the IRS processes your 2021 tax return.

Learn How To Master Your Personal Finances

If you’re looking for a way to master your personal finances, our tax course is the perfect solution. It will teach you everything you need to know about taxes so that you can have more money left over each month to pay down your debt or spend on your family. Visit the Wealtheo™ website today and discover your way toward financial freedom!

Related Articles

Breaking the Barriers on Limiting Beliefs

Limiting beliefs is a real thing. Limitations are the things that keep you from getting what you want in life, whether it be happiness or …

Read More

What You Need To Know About Car Insurance

Car insurance is a type of car liability insurance policy that provides coverage for losses in the event of an accident. Car accidents can cause …

Read More

Ways To Earn Extra Money After the Coronavirus Lockdowns

Although restrictions are starting to ease, and a sense of normalcy is returning, the Coronavirus pandemic has left many people at home stuck with bills …

Read More