Are You Supposed to Get the Child Tax Credit?

While having children certainly adds to your financial responsibilities, a little bit of help is on the way. On July 15 of this year, the IRS sent the first set of the advanced Child Tax Credit (CTC) payments to families of almost 60 million kids. Want to learn more about if your family might qualify? We’ve got the details for you.

The basics of the Child Tax Credit:

What’s a tax credit?

A tax credit is an incentive that may decrease the amount of taxes you owe. It can also be a credit granted in recognition of taxes already paid or a form of state support.

What is the Child Tax Credit specifically?

The Child Tax Credit (which has been around since 1998) is meant to benefit those who claim a qualifying child as a dependent. Since 2018, the CTC maxed out at $2,000 per qualifying child.

This year, as part of the Biden administration’s American Rescue Plan, the CTC has been expanded substantially and is expected to benefit about 39 million American households. Families who claim this advanced child tax credit can receive:

• Up to $3,000 per qualifying child between the ages of 6 and 17*
• Up to $3,600 per qualifying child under the age of 6

Who qualifies for the Child Tax Credit?

Eligibility for the new CTC depends on three factors:

• Whether you have a qualifying child
• Your filing status
• Your household income

What is a qualifying child for the new CTC?

The IRS uses the regular child tax credit rules:

• A child that is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew)
• A child that was under age 17 at the end of 2020
• A child that did not provide over half of their own support for 2020
• A child that lived with you for more than half of 2020
• A child that you’ve come claimed as your dependent
• A child that didn’t file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid).
• A child that is a U.S. citizen, U.S. national, or resident alien

How does your household income affect the advanced Child Tax Credit?

In simplest terms, the more income you make, the less you’ll get. The increase on the normal Child Tax Credit (meaning, the extra $1,000 or $1,600, depending on the age of your qualifying child) starts dropping once you pass the following income thresholds:

• $150,000 for married taxpayers who file jointly and qualifying widows or widowers
• $112,500 for heads of household
• $75,000 for all other taxpayers

For every $1,000 you earn above these limits, your total payment is reduced by $50. For example, individuals earning $80,000 and claiming a qualifying child between the ages of 6 and 17 would have their payment reduced by $250, making them eligible to receive up to $2,750 in total across their payments.

Individuals earning $95,000 and claiming a qualifying child between the ages of 6 and 17 would be completely ineligible for the advanced CTC. Heads of household earning more than $122,500 and married taxpayers who file jointly (and qualifying widows or widowers) earning more than $170,000 are also at thresholds that make them ineligible for the advanced CTC, if they are claiming a qualifying child between the ages of 6 and 17.

However, it is important to note that families who are ineligible for the advanced CTC because they earn higher adjusted gross income are still able to claim the $2,000 per child tax credit, which is available to those making up to $200,000 ($400,000 for married couples filing jointly).

How does the Child Tax Credit work?

When and how will Child Tax Credit payments be made?

The payments are scheduled to go out monthly for six months starting on July 15th. If you have qualifying children between the ages of 6 and 17, you can receive up to $250 monthly per child. For children under the age of 6, you can receive up to $300 monthly per child.

If the math isn’t adding up to the full $3,000 and $3,600 maximums, then you found the catch. These monthly payments equal only up to half of what people are eligible for. Folks will have to claim the rest of the credit when they file their taxes in 2022.

So, should we have gotten a payment already?

A lot of folks who are eligible might’ve received an automatic payment on July 15, and can expect recurring payments on the 15th of each month through December (unless it’s a holiday or a long weekend).

If you qualify for the credit but didn’t receive the first payment yet, don’t fret! Here’s what you can do:

• File your return for 2020 ASAP—if you haven’t already. You can’t qualify for the advanced child tax credit without it because the IRS needs the information on your return to calculate the amount of the credit you’re eligible for.
• Head to the Child Tax Credit Update Portal to see how the government is planning to send you your money. In most cases, the government will automatically pay out the advanced CTC the same way they pay out tax refunds. You can update the payment mode to your preferred method if needed, and even opt out of monthly payments altogether and choose to receive the lump sum with next year’s tax return.

How can Zeta help me manage my Child Tax Credit?

Direct deposit is the absolute fastest way to get your Child Tax Credit! Get your money quickly by depositing your CTC into your Zeta Joint Cards account. Simply add your Zeta account information in the Child Tax Credit Update Portal.

Zeta can also help you figure out how to handle your money once you receive it. Consider how you wish to allocate your funds. Do you want to funnel money towards purchases, pay down stubborn credit card debt, or use the funds for your kids’ allowance or other expenses? You can create new Goals and Rules in the app to automatically funnel money towards one or multiple places!

Phew, good job on making it all the way to the end! Hopefully you’re an expert on all things child tax credit-related now. If you have questions, concerns, queries, or just feel like saying hi, please reach out to us on social media or via support@askzeta.com.

*The CTC also covers kids who will turn 17 in 2021.