The American Rescue Plan Act (ARPA) of 2021 is making changes to the Child Tax Credit. Eligible families will now receive advance payments throughout the rest of the year, starting in July. And these changes include increased credit amounts.
Learn more about the Child Tax Credit, how it works, and how Armed Forces Bank can help you make the most of it.
What Is the Child Tax Credit?
The Child Tax Credit is meant to help keep more money in your family’s pockets by giving parents of dependent children a financial break on their taxes. The tax credit existed for the tax year 2020 as well, and that amount was $2,000 per child -- only those younger than 17 years old.
But the American Rescue Plan Act, which was signed by President Biden, has expanded the Child Tax Credit for tax year 2021. That means that, if you’re a parent, you can expect to get additional financial breaks as a result. Here are some of the major changes to the tax credit for 2021:
The credit includes children who turn 17 years old in 2021.
Families claiming the tax credit will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021.
Families claiming the tax credit will receive $3,600 per qualifying child under age 6 at the end of 2021.
The credit will be partially paid in advance, rather than all at once at the end of the year.
Similar to other types of financial incentives, the amount of your tax credit will depend on your income. The amounts listed above begin phasing out for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
The IRS will use the information included in eligible taxpayers’ 2020 tax returns to estimate advance payments. And if you haven’t fully filed your 2020 returns, or they haven’t been processed yet, they will use the information from your 2019 returns instead.
How To Get Started With the Child Tax Credit?
You’re getting money back from the government for being a parent? Sounds great! But how does it actually work? Do you need to sign up somewhere? These are important questions that many families are wondering about, especially right now.
According to the IRS, advance Child Tax Credit payments will begin in July 2021 and spread out through December. The total amount you’ll be paid between July and December is 50%. You’ll be able to claim the other half of the tax credit on your tax return in 2022, for the tax year 2021.
Additionally, it’s important to understand that the Child Tax Credit is fully refundable. If you’re a parent of a qualifying child, you’re able to take advantage of the tax credit -- even if you don’t have earned income or you don’t owe any taxes.
For example, let’s say you’re filing your 2021 taxes next year, in spring 2022. When you finish, the IRS says that you owe $1,000 in federal taxes. But you’re a parent with two kids -- aged 5 and 8 -- and you’re eligible for the full amount of the tax credit. That means, you can get up to $6,600 in tax credits.
Half of that amount, or $3,300, will be paid out to you in advance, throughout the second half of this year. The other $3,300, you can claim on your tax return. That will reduce your owed taxes to the government to $0 -- and you get to keep the remaining $2,300.
Now, about that sign up question… what do you need to do? According to the IRS, you don’t need to sign up at all to claim the Child Tax Credit. “Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.”
Keep in mind that filing your 2020 tax return electronically with direct deposit also can speed refunds and future advance CTC payments. Your bank account for receiving payments must be linked to your IRS information to receive direct deposits.
Get Your Payments Faster with Armed Forces Bank
Opening an Armed Forces Bank Access Checking account makes it easier to receive your Child Tax Credit payments faster and easier.
Access Checking is a great everyday checking account with all the basics and more. Take advantage of online banking features such as free mobile check deposit1 ,bill pay and account alerts2. Some of our nationwide branches offer Exchanges that are open weekends and evenings.
Armed Forces Bank clients can also bank at over 70 Academy Bank locations and deposit1 cash at over 4,000 Walmart locations3 at the register. In addition you’ll have free access to 30,000+ ATMs through our MoneyPass4 Network. Sign up for direct deposit and get paid an extra day in advance with Early Pay (DFAS direct deposits only).
Getting started is easy. Open your Access checking account today.
When you’re set up with your account, here’s what you need to know about receiving Child Tax Credit payments.
Make sure your Armed Forces Bank account is linked to your IRS information.
Existing customers who have received previous tax payments will automatically receive CTC payments in the same account.
If you are opening a new account, you will need to link it to your IRS information before CTC payments can be received.
If you had a previous account at another bank and just opened your Armed Forces Bank account you will need to link it to your IRS information to ensure your CTC payments are received.
Armed Forces Bank Helps You With Your Financial Milestones
Through all the uncertainty of the pandemic and PCS moves, to your economic stimulus payments, to the Child Tax Credit. Armed Forces Bank is here to help our valued Military Servicemembers and their families navigate it all -- and we’re happy to do it.
Learn more about our services, including our checking and savings accounts, as well as our variety of loan and mortgage options* .
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1Deposits are subject to verification and not available for immediate withdrawal. Deposit limits and restrictions apply.
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3Deposit limits and restrictions apply.
4No fees for withdrawals, transfers, balance inquiries or denied ATM transactions at ATMs in the MoneyPass@Network if you have a MoneyPass@ logo on the back of your card. MoneyPass@ Network ATMs are within the U.S. only.