The American Rescue Plan signed by President Biden in March 2021 made significant changes to the Child Tax Credit (CTC). These changes expand the CTC to cover roughly 39 million households, covering 88% of children in the United States, and make the CTC directly payable to eligible recipients on a monthly basis.
For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17. They will receive $3,600 per qualifying child under age 6. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17.
The increased amounts are phased out for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
Advance payments of the 2021 Child Tax Credit will be made from July through December to eligible taxpayers who have a main home in the United States for more than half the year. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.
These changes to the Child Tax Credit are projected to lift more than five million children out of poverty this year, cutting child poverty by more than half.