The American Rescue Plan temporarily converted the child tax credit into a fully refundable credit of up to $3,600 per qualifying child under the age of 6 and $3,000 per qualifying child between ages 6 to 17. This change was originally for the 2021 tax year only Congress is working to renew the credit for 2022. A fully refundable credit is a credit that is payable to a taxpayer, even if you do not owe any taxes.
Using 2019/2020 income tax numbers, many taxpayers have been receiving child tax credit monthly payments since July. Please be aware that if your income has increased in 2021, you may be required to repay some or all of the credit paid to you. Further, if one of your children is no longer considered a qualifying child, in some circumstances you may need to pay back some or all of the credit received.
While most people love receiving “free money” on a monthly basis, you should also be aware of the potential downside of accepting these payments. You are able to opt out of the payments by clicking here! (link to contact page)