BOISE, Idaho — Starting on July 15, some families with kids could see more federal money headed their way this summer, as part of the child tax credit in the American Rescue Plan COVID relief bill signed in March.
Roughly 39 million households in the United States will automatically get these payments through direct deposit, paper checks, or debit cards, according to the Internal Revenue Service.
“Before there was only $2,000 per child 16 and under now you're going to get $3,000 per child over five to the age of 17, so they're adding another year,” said Financial Advisor Thomas Brown with Petso Financial Consultants.
He said that amount increases to $3,600 with children six and under.
This tax credit isn't anything new though. It's the tax credit that Americans get as part of their tax refund in the spring, but as part of the American Rescue Plan, instead of getting the credit during your tax refund, parents will soon see a monthly payment.
“Usually you just got the credit as part of preparing your taxes,” Brown said
Parents with kids under six would see a monthly payment of up to $300. If the child is over the age of six, the payments are up to $250.
“So, you're going to get extra money during the year and then it also allows you to get more I guess would be another advantage,” Brown said.
There are some cons though and Brown told KTVB it has some folks wanting to opt-out of the monthly credit.
“The reason for that is there is a limit on the amount of where you get a credit, so say your income was going to be more in 2021 than 2020 and you're actually qualifying for it on your tax return in 2020 but not in 2021 so you don’t want to have to pay money back,” Brown said.
To qualify, individual taxpayers will need to make $75,000 or less. For a married couple filing jointly, that adjusted gross income is $150,000 or less.
“Really pay attention to what your income is going to be this coming year and make sure you're able to, you don’t want to end up having to pay money back so if you're going to have quite a bit more income in 2021. Really think about opting out,” Brown said.
Half of the credit will be paid monthly from July to December. The other half will be paid through the tax refund. According to the IRS, there will be an option to opt-out of the monthly credit on their website in the coming months, ahead of July 15.
When Brown spoke with KTVB, they outlined three possible scenarios parents may find themselves in.
DIFFERENT FAMILY DYNAMICS: DIVORCED COUPLE
“That’s going to be confusing because if you have someone who, you might claim a child one year and then the next year you're not going to be able to claim them, so for example you claimed a child in 2020 and the you qualified for this enhanced credit, but then the next year you're not going to claim them ... and so having that ability to opt out is really important if you're in that circumstance, so you're not having to pay back the IRS money.”
UNMARRIED COUPLE WITH KIDS:
“That's going to be a little difficult to and depend on the parent who claims the child. Typically, it's going to be the parent who makes the most money in the household. “
HAD A BABY THIS YEAR:
“If you're having a baby this year, the IRS is supposed to have the ability for you to be able to log in and say we had a baby and so therefore, you can get the credit for the baby this year and these monthly credits instead of waiting for it at tax time.”