The American Rescue Plan Act of 2021 included additional relief for qualifying parents. Rather than waiting until you file your 2021 taxes, you can receive up to 50% of your child tax credits in advance. If you qualify, that means you could claim up to $3,600 for each eligible child between July and December 2021, depending on certain criteria.
These advance payments offer many opportunities to improve your current financial situation, in addition to your children’s futures. In this article, we’ll show you great ways to use your child tax credit payments.
Who is eligible for the 2021 Child Tax Credit?
If you claimed at least one dependent who was 17 years old or younger on your 2019 or 2020 tax return, you may have qualified for the 2021 Child Tax Credit. Eligibility depends on your income, if you live with the child, and the child’s legal status. The IRS continues to post guidance on eligible recipients of the 2021 Child Tax Credit on their website. It is important to note that your tax credit may change due to different “phase out” criteria in 2022 after filing your 2021 taxes.
Learn more about eligibility requirements for the 2021 Child Tax Credit.
When will the child tax credit be released in 2021?
If the IRS has already processed your tax returns for 2019 or 2020, they would have sent your first advance payment on or after July 15, 2021 if you qualified for the credit. The IRS will continue to send monthly payments through December 2021. If you qualify, you will receive the rest of your tax credit payment after you file your 2021 tax return in 2022.
How can I use my child tax credit payments?
There aren’t any restrictions or requirements for the ways you choose to spend your advance payments. That said, this extra money can help you improve your current financial situation and prepare for the future. Use the areas below to find ways to use child tax credit payments.
Can I use my child tax credit payments to pay bills?
Yes! If you are behind on any of your bills, or have taken on debt to meet your responsibilities, these additional funds are a great way to get back on track. With tax credits helping pay your bills, you probably have less stress and more time to focus on finding steady sources of income to help improve your financial situation.
Can I use my child tax credit payments to pay for childcare?
Childcare is another great way to use these payments. As businesses re-open and end remote work opportunities, dependable childcare allows you to return to work with more peace of mind. Even if you are still working from home, childcare gives you more time and space to focus on providing for your family.
Should I save my child tax credit payments?
If you don’t currently need these advance payments, saving them for the future is also a possibility. You can, for example, start a 529 plan account. Also known as a college fund, this savings account helps you put money aside for your children’s education expenses. You can use the funds for college, your kid’s student loan repayments, or K-12 tuition payments.
You can also put your child tax credit payments in a savings account for any future needs. You can use this money to pay for emergencies, such as healthcare or vehicle bills. Moreover, you can put these funds aside for family vacations, presents, or any number of extracurricular activities.
Can I invest my child tax credit payments?
Are your bills paid and your emergency funds already set aside? In this case, you may want to invest this extra money for future returns. Consider investing for yourself or for your children. Even though retirement may be years away, investing today gives your money time to grow, hopefully into a comfortable future!
