WASHINGTON, D.C. — Eligible parents can get up to $300 per child from Washington as a monthly tax payment starting July 15, the Treasury Department said Monday.
That means the 2020 tax return that was due to be filed by the end of Monday with the Internal Revenue Service now could determine how much, if anything, they can get.
The IRS will base the upcoming child tax credit payment on what that return says about a family. Payments will be made on the 15th of each month.
They’ll look at two things: Adjusted gross income and the number of children who qualify for a tax credit.
Here’s why: The pandemic-inspired American Rescue Plan, signed into law in March, increases that credit for 2021 and expands eligibility to 17-year-olds. It also makes the credit fully refundable, meaning it will be available for nearly all children, including the 39% who were not getting a full benefit because their families were too poor to qualify.
In California, that means an estimated 10 million children, almost all with parents who have lower or middle-class incomes, should benefit, according to analysis by the Washington-based Institute on Taxation and Economic Policy.
A single parent with a 4-year-old and an 8-year-old and an adjusted gross income of $25,000 would receive $550 a month.
A married couple with a 4-year-old and an 8-year-old filing jointly and earning $105,000, the state median for a family of four, would also receive $550 a month. The figures are derived by a calculator from Kiplinger, which specializes in personal finance advice publications.
Because the credit diminishes as incomes go up, if that same couple made $200,000, their monthly payment would be $342. If the income was $500,000, they’d get no credit.
The tax break is in addition to other aid for child care, such as a separate credit for child and dependent care.
It’s help that parents “desperately need as they continue to struggle with the effects of the COVID-19 pandemic,” said Sarah Rittling, executive director of the First Five Years Fund, a child care advocacy group.
On the 2020 returns, parents can subtract $2,000 for each child up to age 16.
But in 2021, and the returns people will file next year, qualifying parents will be able to get a credit of up to $3,000 for children to 17, and $3,600 for those 5 and under.
Starting July 15, they can begin receiving that credit via monthly payments of up to $250 per child ages 6 to 17 and $300 for children under 5.
How the child tax credit works
Here are some of the more common questions and answers provided by IRS in a press release Monday and in an interview with The Sacramento Bee about how this will work:
Q: Who will qualify?
A: The maximum is available to taxpayers with adjusted gross incomes of up to $75,000 for single filers, up to $112,500 for heads of households and up to $150,000 or less for married couples filing jointly.
Q: So if I earn more I can qualify?
A: It depends. The amount of the credit is reduced as incomes go higher.
Q: Suppose I can’t file my 2020 return on time. Will I still get payments starting July 15?
A: If you qualify, yes. The IRS would base the payments on information in your 2019 return.
Q: I don’t normally file a return at all. Can I still get a payment?
A: Yes. File a return. You could qualify for a credit even if you have no income. ITEP estimates that California families with incomes of less than $26,500 would see an average benefit of $4,250.
Q: How will I get the credit starting in July?
A: If you file electronically and choose direct deposit, IRS will send the payment to your account. Most people will receive the credit that way. Others will be mailed paper checks or given debit cards.
Q: Six months of monthly payments don’t add up to $3,000 or $3,600. When will I get the rest of the credit?
A: You’ll claim it on the 2021 tax return you file next year.
Q: Suppose I don’t want a monthly payment, and just want to take the full credit on that return?
A: IRS will advise everyone in the next few weeks how to decline the monthly payment.
Q: What if my income or family makeup changed this year?
A: The IRS says details will be available soon as to how you would give them that information.