(NEXSTAR) — If you’ve got kids and file taxes, chances are your bank account is getting a little boost later this week. As parents probably know by now, the Biden Administration’s American Rescue Plan calls for monthly payments to parents beginning Thursday, July 15.
For this year only, the child tax credit has increased from $2,000 per child to $3,000 per child. Parents of children under age 6 would be eligible for an even larger $3,600 total credit. The plan also includes $3,000 benefits to the parents of 17-year-olds who meet plan qualifications. Previously, children had to be 16 or younger.
Up to half of that credit will be distributed over the final six months of this year, meaning a typical parent of one kid over 6 can expect a $250 payment later this month as the first of six installments of the advanced payment of $1,500. There are also phase-outs on the increased benefits based on income. Use the calculator at the bottom of this article to see how much you should expect on your first check.
Even if you already know where you fall on that calculation, there are still some considerations worth your attention.
Your child tax credit checks probably won’t be checks
As with stimulus payments, the vast majority of eligible Americans won’t have to deposit a check to get their advanced credit. The IRS says direct deposits will be made into the bank account currently on file with the agency. Only those who are not enrolled for direct deposit will get a physical check.
If you’ve already filed your taxes for 2020, there’s nothing for you to do but wait for your payout.
“The IRS encourages people without current bank account information to use the tool to update their information so they can get the payments sooner,” the IRS urged in an online update about the payments.
The agency has launched a payment management portal that allows filers to change their banking information.
You can get a CTC check even if you don’t owe taxes
In past years the child tax credit was partially refundable, meaning you weren’t eligible for the full credit if you didn’t owe any taxes. That’s not the case this year, where the more generous benefits are designed to bridge the gap for lower income families.
In fact, the IRS has set up a portal just to collect the needed information from non-filers who are eligible for the funds. You don’t even need to have a permanent address. Also, credit is not considered income, so the IRS said the check “will not affect your access to government benefits like SSI, SNAP, TANF or WIC.”
The childcare tax credit sure sounds the same as the CTC but it isn’t
The $1.9 trillion American Rescue Plan signed in March also boosted the benefits for people who employ childcare so that they can get to work. Like the child tax credit, this is a previously existing benefit, with improved benefits in 2021.
This year, those who qualify can claim certain expenses of up to $8,000 for one eligible child, or $16,000 for two or more eligible dependents. Both amounts are more than twice that of prior limits. As with the child tax credit, the benefit phases out at higher incomes. Unlike the CTC, these payments cannot be taken in advance, and will only be reflected after setting up your taxes for the year.
There’s still time to opt-out of monthly CTC checks
The checks going out this month are advance payments on the 2021 credit, meaning you are being given part of next year’s refund now. Any cash you take won’t then be applied at tax-filing time, as the full refund had in previous years. That means you’ll get a lower refund or owe a bit more next spring than you would if you opted out of the monthly checks.
For those who feel a big payout next year is preferable to smaller checks in 2021, the IRS has created an opt-out portal. As of last week, it’s too late to sign up to skip the July payment. If you want to bypass the final five advanced payments, you need to do so by August 2nd.
Watch out for your rising income
Use the calculator below to estimate how much you might receive in child tax credit periodic payments beginning on July 15.
For most, the credit is based on your 2020 tax information. If you experienced unemployment last year, or saw a big raise in 2021, you could potentially see your salary move above credit phase-out levels in 2021, meaning you are getting advanced payments that you won’t actually be owed when taxes are filed next year. In theory, this could leave some credit recipients needing to pay back some of the money next year.