How is the Child Tax Credit Going to Impact Taxes?

The Advance Child Tax Credit (CTC) has been giving a boost to the bank accounts of parents and guardians across the country since this past July.

These $250–$300 credits will be doled out over the course of six months, acting as an advance on the half of the tax credit that you as a parent or guardian typically receive upon filing their yearly taxes. These monthly credit advances can be a huge help during a time when you need a little extra support. Because of its nature as a tax credit, The Advance CTC will have some affect on 2021 taxes. For starters, since the advance only covers half of the total CTC, parents and guardians can claim the other half when filing their 2021 taxes. Depending on how much the CTC recipient owes in federal taxes, all or part of the remaining half could be refunded by the IRS.

It’s important to remember, though, that the advance CTC is distributed based off 2020 tax information. Changes in dependency, a child’s age, the parent or guardian’s income – these things can affect their eligibility for the CTC payments. If a parent or guardian received more than they’re eligible for, they’ll need to report it as extra income tax – which can reduce their refund or increase their amount owed. Thankfully, the IRS has made a Child Tax Credit Portal available, so parents and guardians can update their information – and even opt out – and avoid paying back excess CTC.

The CTC is a great monthly boost for parents and guardians. If not much has changed for your household since the 2020 tax season, the monthly tax credits won’t impact your 2021 tax season. If you have had changes in your household, no need to worry: you can log on to the Child Tax Credit Portal and submit those changes. You might even consider reaching out to the IRS for payment plan options or – if you choose – having your CTC payments waived.

If you keep your personal information up-to-date, the CTC shouldn’t have an impact on your upcoming tax season – except for the possibility of an additional refund, of course! There’s one way to find out just how your taxes will line up, and that’s to get the jump on filing your taxes. It’s never too soon to reach out to World Finance about your taxes. We will help you get all your info in order, Child Tax Credit and all.