Arndt, Sutak & Miceli, LLC

Child Tax Credit- Is it Free Money?

The Child Tax Credit (CTC) is a decades-old support for families instituted to help them afford the everyday expenses of raising children. It has historically been claimed at the time that a parent or caregiver files their taxes, but it has also been seriously flawed: millions of families did not previously qualify for the credit because, ironically, they earned too little. The American Rescue Plan, signed into law on March 11, 2021, expanded and improved upon the credit for one year.

Additionally, the American Rescue Plan also changed the way that the benefit will be available to families this year: instead of having to wait until they file their taxes in 2022, families will be able to get a cash benefit “advance” on the credit through monthly payments. Starting July 15, eligible New Jersey families have begun to receive monthly checks of up to $300 per child, a result of an expansion of the Child Tax Credit under the federal stimulus American Rescue Plan.

It is estimated that approximately 82% of New jersey children will be eligible for the benefit under the expansion-or more than 1.6 million children- according to U.S. Senator Bob Menendez, D-N.J. Considering the number of parents in NJ that maintain separate households and file separate taxes, parents need to be aware of what this Credit is, who will receive it, and what impact it can have on their taxes.

Is my child eligible?

Most families with children qualify. Families must:

  • Have a main home in the U.S. for more than half the year; or
  • File a joint return with a spouse who has a main home in the U.S. for more than half the year; and
  • Have a child under 18 who has a valid Social Security number.

Full benefits are available to parents as follows:

  • Single filers with an adjusted gross income below $75,000
  • Heads of households with income below $112,000
  • Married couples filing jointly with income below $150,000

Partial benefits are available to parents as follows:

  • Reduced $50 for every $1,000 in income above the thresholds of $75,000 for single parents and $150,000 for joint filers.
  • Single filers who make up to $200,000 or joint filers who make up to $400,000 are eligible for the minimum credit of $2,000 per child.

In a very positive change from the current law, the expansion of the Child Tax Credit in the American Rescue Plan means that you do not have to be employed to receive the benefit; even families who have no income at all are eligible.

How much am I entitled to?

Prior to the American Rescue Plan, the previous tax credit was $2,000.00 per child under 17. The American Rescue Plan bumped up the Child Tax Credit to $3,600 per child between the ages of 0 and 5, and $3,000 per child ages 6 to 17. Older children who are 18 and full-time college students ages 19 to 24 also qualify for a one-time payment up to $500.

These payments are being made by way of a monthly advance of these funds beginning on July 15: up to $300 a month for children between 0 and 5 years old, and up to $250 a month for children between 6 and 17. Families can get the remaining lump sum after they file their 2021 tax returns.

  • So, for example, if you have one child, aged seven, you will receive $3,000 over the course of a year, or $250 per month from July to December 2021.

If you filed tax returns for 2019 or 2020, or provided your information to the IRS to receive economic impact payments, you should have automatically received payment on July 15. These payments will be delivered again on August 13, September 15, October 15, November 15, and December 15 according to the IRS.

How long will this last?

The Child Tax Credit expansion lasts until the end of 2021, but the Biden administration and Congress are pushing to extend the $3,000 tax credit through 2025 through the American Families Plan. Nothing has been finalized yet though, so we do not currently know.

Can I opt out?

If your family’s income increased above the eligibility threshold this year, or your child aged out, you can opt out of payments on the IRS website.

The deadlines to opt out for each payment are:

  • Aug. 2 for the Aug. 15 payment
  • Aug. 30 for the Sept. 15 payment
  • Oct. 4 for the Oct. 15 payment
  • Nov. 1 for the Nov. 15 payment
  • Nov. 29 for the Dec. 15 payment

What if I receive the monthly payments but don’t qualify?

If you receive monthly payments but don’t qualify for the tax credit when you file your 2021 tax return, you will be required to pay the money back.

My child’s other parent claimed them on their taxes for 2020, but I am entitled to claim them in 2021. How do I get the credit?

Unfortunately for children of families who are no longer intact, the Child Tax Credit payment system has not taken into account that parents often alternate claiming the taxes for their child/children. If you are one of these individuals, contact our office now so we can discuss what steps can be taken in the family court to ensure that this credit is appropriate handled for your child.

Skip to content