Millions of U.S. families with children will receive expanded Child Tax Credit payments starting in July 2021.
The American Rescue Plan enhances aspects of the Child Tax Credit. In 2021, the maximum Child Tax Credit is $3,600 for children younger than age 6 and $3,000 for those between 6 and 17.
If your family already has essential requirements covered, the child tax credit could provide the ideal opportunity to contribute to your child’s future by allowing funds to have the potential to grow as your child grows.
Here are three things to know:
- The IRS will use 2019 or 2020 tax returns to estimate advance amounts for the Child Tax Credit. The payments are income-based and would start to phase out for individuals earning more than $75,000 a year for a single filer or $150,000 for those married filing jointly. Families with children eligible for the expanded Child tax Credit who did not have to file taxes in 2019 or 2020 because they had too little income, or who did not sign up to receive stimulus checks from the IRS, need to sign up for the payments via the IRS website.
- The IRS will distribute Child Tax Credit payments monthly from July to December 2021. Half of the child tax credit will come in the form of these advance payments. Taxpayers will claim the remaining half when filing their 2021 income tax return.
- Families may want to consider saving all or a portion of their Child Tax Credit payments in an Invest529sm account. If you haven’t already, consider opening an Invest529 account for your child(ren). 529 plans offer tax-deferred earnings growth and tax-free withdrawals when you use the funds to pay for qualified higher education expenses. Studies show that children are more likely to attend and graduate from college when they have a college savings account.
Additional details on Child Tax Credit payments are available on the IRS website.
Ready to open an Invest529 account? Open an account online today!