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What you need to know about the changes to the child tax credit, including eligibility, monthly payments and more.

As of July, many parents are eligible to receive expanded benefits, including child tax credit monthly payments, thanks to new federal legislation.

Below is a summary of the American Rescue Plan Act of 2021’s increased Child Tax Credit (CTC) for the 2021 tax year, outlining eligibility requirements, how much you can expect to receive from the child tax credit and when you can expect to receive it. Our bankers stand ready to help you set up a checking or savings account to receive your child tax credit monthly payments and to discuss how the payments might figure into your family’s savings plan.

How does the child tax credit work?

Historically, the child tax credit has provided families with dependent children with an annual tax break of as much as $2,000, which was distributed when individuals completed their taxes. But under the new bill, the tax credit is increased to $3,000 per child for eligible households with kids ages 6 to 17 and $3,600 per child for eligible parents with kids ages 5 and younger.

This year, parents eligible for the child tax credit can also receive some of the funds in advance. Instead of waiting until you file your 2021 income taxes, qualifying families will receive half the credit in advance through child tax credit monthly payments.

Child tax credit monthly payments were sent in July to qualifying parents and will continue to be deposited each month through December. Parents will then receive the remaining half of the credit when they file their 2021 tax returns.

Who’s eligible for the child tax credit?

Eligibility for the child tax credit is based on a filer’s adjusted gross income, or AGI. Single taxpayers who earn less than $75,000 are eligible for the expanded $3,000 or $3,600 payments, depending on the age of their children. Heads of households who earn below $112,500 also are eligible for the child tax credit, as are married couples who earn less than $150,000.

Note that single filers who earn under $200,000 and couples who earn under $400,000 will still qualify for a $2,000 credit.

How much is the child tax credit?

The breakdown of how much you’ll receive for the child tax credit is contingent on several variables. The chart below shows how much parents who qualify for the $3,000 or $3,600 payments will receive and when they’ll receive payments.

Month Payments for families with children 5 and younger Payments for families with children ages 6 to 17
July 2021 $300 $250
August 2021 $300 $250
September 2021 $300 $250
October 2021 $300 $250
November 2021 $300 $250
December 2021 $300 $250
April 2022 $1,800 $1,500

How can I make sure I receive the child tax credit monthly payments?

If you’re eligible for the child tax credit, the best way to receive the funds is through direct deposit. If you don’t have an account with direct deposit, you can easily open a savings or checking account online or visit a banking center to enroll in direct deposit. Visit the IRS tool here to check your eligibility and manage your payments.

How can I best use or invest these payments?

Child tax credit monthly payments offer a great opportunity for families to plan for their child’s future and build up savings. These payments can cover the day-to-day costs of a child’s needs, like food and clothing. But if your paycheck already covers necessities, the tax credit could help fund other short- or long-term goals.

If you meet child tax credit eligibility, we encourage you to think about investing that money toward building your savings or starting a college or emergency fund. The amount you receive for the child tax credit over time can really add up!

To discuss how child tax credit monthly payments can help you reach your savings goals, talk to your local banker or call 1.800.205.3464.

 

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