What is the expanded Child Tax Credit?

CTC letter
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The CTC existed before the latest coronavirus relief package but maxed out at $2,000 per child. This year, the credit has grown to a maximum of $3,600 per child, and some of it is coming in advance.

The first half of the credit will be paid out upfront in the form of direct deposits or paper checks each month. The rest is available to claim as a normal tax credit next year.

For every child under the age of six, households will receive a monthly check of up to $300 between now and the end of the year. Households with children aged six to 17 will receive up to $250 per child each month.

Not everyone is getting the same amount. If you earn more than $75,000 as an individual, or are part of a married couple who earns $150,000 or more, you will not receive the maximum amount.

If you earn $200,000 or more on your own, or you and your spouse make in excess of $400,000 a year, you won’t receive any checks, but you will be able to use the standard $2,000 tax credit come tax season.

Be aware that if you’d rather use the entirety of your CTC as a tax credit, you can opt out of the monthly payment program by visiting the IRS’s CTC update portal.

How to make sure you get your payments

IRS building
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If you filed your taxes this year, the IRS should have all the information it needs to get you your CTC funds by direct deposit.

But if you’re a parent and you have yet to receive anything from the IRS, there could be a few reasons why:

  • The IRS doesn’t have your info. If you didn’t need to file a tax return in 2019 or 2020, the IRS may lack the information it needs to make a direct deposit. You can still get the IRS the details it needs by using its non-filer sign-up tool.

  • Your primary residence isn’t in the U.S. Your main home must be in the U.S., and you have to live in it for more than half the year, in order to qualify for the expanded CTC. You’ll also be eligible if you file a joint return with a spouse who occupies a U.S. primary residence for more than six months a year.

  • Your kid doesn’t qualify. Your household won’t be entitled to the expanded CTC if your child is 18 or older. Same goes if your child doesn’t have a valid Social Security number.

  • You make too much money. If you earn $200,000 or more, your household will not receive any direct payments.

You can check whether you qualify for these advanced CTC payments using the IRS’s Eligibility Assistant.

The IRS is also urging parents to be wary of scams related to the CTC payments. The IRS never sends out emails or texts instructing you to open attachments or visit non-government websites, so don’t be fooled by any sophisticated fakes.

What if you’re not getting any payments?

Cut expenses
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If your child is over 18 or you're otherwise ineligible, you'll have to look elsewhere to inject extra cash into your budget. Depending on your situation, you may have several major money-saving moves at your disposal.

Haven’t refinanced your mortgage? You could be missing out on some game-changing savings. With mortgage rates under 3%, more than 14 million Americans could save an average of $287 a month with a timely refi, says mortgage technology and data provider Black Knight.

Maybe a refi isn’t in the cards. You can still reduce the cost of homeownership by finding cheaper home insurance. Sometimes all it takes is a little comparison shopping to save hundreds of dollars — and the same strategy can help you save on car insurance, too.

If you’re carrying a lot of high-interest debt, like the kind on credit cards, reducing your monthly interest costs should likely be your first priority. Paying off your debt with a single low-interest consolidation loan can help you lose less money to interest and wipe out your debt faster.

And it may sound counterintuitive, but even families that are struggling have the power to invest in today’s white-hot stock market. You don’t need tens of thousands of dollars to get started: One popular app helps you invest in a diversified portfolio using the “spare change” left over from your everyday purchases.

About the Author

Clayton Jarvis

Clayton Jarvis

Reporter

Clayton Jarvis is a mortgage reporter at MoneyWise. Prior to joining the MoneyWise team, Clay wrote for and edited a variety of real estate publications, including Canadian Real Estate Wealth, Real Estate Professional, Mortgage Broker News, Canadian Mortgage Professional, and Mortgage Professional America.

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