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New $3,000 child tax credit payments set to start in July. Here’s what to know

Parents may soon start getting monthly payments from the IRS, due to a recent change to the child tax credit.

IRS Commissioner Charles Rettig said Tuesday that the agency was on track to start issuing that aid in July.

Here’s what taxpayers need to know about the tax credit and income stream.

Child tax credit

The American Rescue Plan, a $1.9 trillion Covid relief law that President Joe Biden signed in March, enhanced the child tax credit in a few ways.

The changes are temporary — they apply only to 2021 taxes (i.e., during tax season next year) unless Congress extends or makes them permanent.

The credit is available to families with kids.

Before the new law, families got a $2,000 credit per qualifying child — generally a dependent under 17 years old.

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Single adults with up to $200,000 of income (and married joint filers earning $400,000 or less) got the credit’s full value. The amount fell by $50 for every $1,000 of income over those limits.

That structure remains in place.

But the American Rescue Plan offers a larger benefit to low and moderate earners, according to the Congressional Research Service. Higher-income families will generally get the same credit as under prior law.

Larger credit

Monthly payments

Tax returns

There’s a caveat: Taxpayers must file a tax return to get the advance payments. That’s the case even for people who don’t typically file a return.

Taxpayers will get the remaining half of the child tax credit when filing their 2021 tax return (during the 2022 tax season).

“People should be filing those right now so they’re eligible for the payments,” Maag said of tax returns.

Constantine Johnny | Moment | Getty Images

“But if they don’t, they’ll still be able to get the full child tax credit,” she added. “They’ll just get it as they normally would when they file their taxes next year.”

The IRS extended the federal tax filing deadline for 2020 returns by a month, to May 17.

Parents will be able to opt out of the advance payments — and elect to receive the full credit at tax time in 2022 — on an online portal the IRS will roll out this year.

Paying back the IRS

Protections from repayment

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