More families are now eligible for the Child Tax Credit starting this year.
The American Rescue Plan expanded the Child Tax Credit, which means families who are eligible to start receiving the credits may start seeing those payments as early as next month.
This isn't completely new, according to Hilda Zacarias, a certified public accountant (CPA) in Santa Maria. Families previously received a maximum of $2,000 for children up to the age of 16.
Now, not only has the amount gone up but the qualifying age group has also increased by a year to age 17.
"That is in of itself is fantastic, but they also made it to impact in a more positive way, low-income families," Zacarias said.
Those who qualify may receive payments up to $300 per month for each child under the age of 6 and up to $250 per month for each child ages 6 through 17.
Many parents and families by now have received a letter in the mail from the IRS informing them about the advanced child tax payments which means they qualify.
So should people opt-in or opt-out?
Professionals say one thing to keep in mind when making that decision is the possibility of your income changing, specifically increasing, this year.
"If you find that you are not eligible for that full child tax credit or eligible at all that would be a reason to opt-out because you are going to have to pay that back," said Lisa Green-Lewis, a CPA for TurboTax.
If your income lowers, you would then be eligible to receive additional money in the form of a credit on your 2021 tax return.
Non-filers are also encouraged to receive the payments and the IRS launched a tool to help.
For parents like Colleen Volhiem, taking the advanced payment is the better choice for her at the moment.
"I'm going to opt-in. I wish I didn't need it but I do and I think there's a lot of people in my position,” she said.
The IRS is set to start sending out payments through direct deposit, paper check, or debit cards as early as July 15 for those who qualify.
For those who wish to opt-out, the IRS says they will also have a tool online to do so before July 1.
If you do decide to receive the monthly payment, keep in mind that when it comes to filing 2021 tax returns, your credit will be reduced.
Here are the qualifying thresholds according to the IRS website:
- Parents with a single filing status or married filing separately making up to $75,000 a year,
- Parents filing married filing jointly or a parent filing as a surviving spouse, earning up to $150,000 a year,
- Parents filing as head of household earning up to $112,500