Child Tax Credit Essentials for Grandparents with Dependents

If you have grandchildren that you claim as your dependents on your taxes, you’ll want to read this.

The American Rescue Plan Act (ARPA), which was passed in March 2021, will have a major impact on the Child Tax Credit (CTC) for the 2021 tax year.

NOTE: If you do not have dependents that you claim for tax purposes (such as grandchildren), none of this will apply to you. 

2021 Child Tax Credit Increases

ARPA increased the Child Tax Credit by 50% to $3,000 per child. For dependent children under 6, the credit goes up to $3,600 per child. Additionally, the age cut-off was increased from 17 to 18.

There is a catch, though: the increased tax credits are subject to an income limit. If your 2021 income exceeds $75,000 as a single filer, $112,500 as a Head of Household Filer, or $150,000 as a Married Filing Jointly filer, the credit amount stays at $2,000 per dependent under age 18.

Mandatory Advance Payments

ARPA also includes mandatory advance monthly payments of the those that quality for the Child Tax Credit.

Starting in mid-July 2021, taxpayers who qualify will begin receiving monthly advance payments of their total annual Child Tax Credit. The payments will last through December, equating to one-half of the total 2021 credit amount. The remainder the credit will be paid after you file your 2021 taxes in 2022.

Because of these advance payments, if you’re used to using the Child Tax Credit to boost your refund at tax time, you should be prepared to receive a lower refund.

Can I Opt Out? 

Yes! If you don’t want to receive the advance Child Tax Credit payments and would prefer to receive the full amount at tax time, you may out via the IRS website. Here’s how to do that:

1. Go to www.irs.gov and click on the link entitled Get Answers on the Advance Child Tax Credit
2. On the next page, click on the link entitled Unenroll from Advance Payments
3. You’ll then be transferred to the Child Tax Credit Update Portal. Again, click Unenroll
4. If you don’t already have one, you will need to create an account with IRS thru id.me. Please note that setting up an account will take between five to ten minutes and will require you to upload photos of your driver’s license or other government-issued identification, as well as participate in a facial scan.
5. Once your id.me account has been established and verified through email, you may complete the un-enrollment process on the IRS website

The two most important points about un-enrolling: 

1. If you file a joint return with your spouse, each of you must unenroll on the IRS website individually. That means you will BOTH need to complete the un-enrollment process.
2. Because the deadline for unenrolling from the first advance payment was June 28, qualifying taxpayers will receive the first advance check in July even if they opt out. You can still unenroll from the advance payments for August through December, but you WILL receive a July payment.