Advance Child Tax Credit: What Families Needed to Know

Editor's note: This article was originally published in 2021 and describes the 2021 advance Child Tax Credit payments, which have since ended. Credit amounts and rules change, so speak with a tax professional about your current situation.

The Child Tax Credit is a benefit for American taxpayers for each qualifying child. A qualifying child must be a dependent of the taxpayer. Since raising a family is as financially challenging as running a business, this credit has given families real financial support. It was expanded by the American Rescue Plan Act of 2021.

What changed in 2021

Under the expansion, the Internal Revenue Service (IRS) made advance payments of 50% of the estimated Child Tax Credit a family could claim on its 2021 tax return. If the IRS had processed the taxpayer's 2020 or 2019 return, monthly payments were sent from July through December based on that return.

Why filing mattered

You needed a filed 2019 or 2020 return to receive the advance payments. If you hadn't filed for those years, the IRS created an online tool for a simplified return so you could become eligible. Once you filed electronically, the bank details on your return were used for direct deposit.

There was no minimum income requirement. Even with no income, you could receive the benefit as long as you had a qualifying child and you or your spouse had your main home in one of the 50 states or the District of Columbia for more than half the year.

The bigger lesson

Tax benefits only help the families who know about them and file on time. Keep your returns current and check your eligibility every year.

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