The Advance of the Child Tax Credit
Why am I receiving this payment?
Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return during the 2022 tax filing season. If the IRS has processed your 2020 tax return or 2019 tax return, these monthly payments will be made starting in July and through December 2021, based on the information contained in that return
How do I opt-out?
If you prefer not to receive monthly advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you know you will not be eligible for the Child Tax Credit for your 2021 tax year, you can unenroll through the Child Tax Credit Update Portal (CTC UP)
Does my spouse have to opt-out as well?
Yes, both spouses will have to go through the process to unenroll in order to opt-out of the advance.
Can I opt-out after receiving payments?
You can opt-out at any time in 2021 to stop receiving your remaining monthly payments. To unenroll, the IRS said you must opt-out three days before the first Thursday of the month to not receive the next month's payment
Will this be taxable?
These payments will not be counted as taxable income.
Will I have to pay it back?
Maybe. If you qualify for the repayment protection (you are a single filer making under $40k; HOH making under $50k; MFJ making under $60k) you will be excused from repaying some or all of the excess amount. If you do not qualify for repayment protection, you will need to report the entire excess amount on your 2021 tax return as additional income tax. This additional income tax will reduce the amount of your tax refund or increase your total tax due for 2021
Should I opt out?
Here are some reasons why unenrolling from the 2021 advance child tax credit program may be a good idea:
- You'd rather have one large payment next year instead of six smaller payments spanning 2021 and This could be the case for families saving up for a big expense or those who've budgeted for that money to pay off outstanding debt.
- You know your household circumstances or tax situation will change (or has already changed) this year and don't want to deal with having to update your information in the portal. This could be the case for divorced parents who alternate custody of a child.
- You're concerned the IRS might send you an overpayment based on old tax information from 2020 or 2019, and you don't want to worry about paying that money back. That could be the case if your household income goes up or if a dependent ages out of an age bracket before the end of 2021.