The American Rescue Plan Act which was enacted in March 2021, expanded two common tax credits for families, the Child Tax Credit (CTC) and the Child and Dependent Care Credit (CDCC).

The CTC and CDCC are increased in amount per qualifying child, and these additional credit amounts are subject to a higher phase out range based on modified adjusted gross income. In addition, the CTC and CDCC are fully refundable for 2021.

Beginning July 15, 2021, through December 31, 2021, eligible taxpayers will start receiving advanced payments from the IRS for half the total credit amount. The payments can be as much as $300 per child per month for a total of $1,800 per child. Taxpayers will claim the other half of the child tax credit when they file their 2021 income tax return.

Overpayments of the Advanced CTC

Unlike the stimulus payments that the government sent out in 2020, the law requires overpayments of the CTC and CDCC advanced payment to be paid back to IRS.

Eligible taxpayers are automatically enrolled to receive the advance payments based on the adjusted gross income reported on their 2020 tax return (or 2019, if 2020 is not filed yet). If taxpayers 2021 adjusted gross income is greater than the amount reported on 2020 tax return, the law requires overpayments of the CTC and CDCC to be paid back.

Opt-Out of Monthly Child Tax Credit Payments

If taxpayer’s eligibility for CTC, or CDCC is expected to change in 2021, it may make sense for the taxpayer to decline the advanced payment and opt out of monthly child tax credit payment by using the IRS's online Child Tax Credit Update Portal. (To sign-in, you'll need either an existing IRS username or an ID.me account.).

There are monthly opt-out deadlines to cut off payments before the next one arrives. Taxpayers who file as married filing joint tax return, both spouses need to opt-out since unenrolling only applies on an individual basis. If both spouses don’t unenroll, they'll still get half of the joint payment they were supposed to receive.

Opt-Out Deadlines for Monthly Child Tax Credit Payments

Payment Date Opt-Out Deadline
August 13, 2021 August 2, 2021
September 15, 2021 August 30, 2021
October 15, 2021 October 4, 2021
November 15, 2021 November 1, 2021
December 15, 2021 November 29, 2021