An extra child tax credit payment in the amount of $500 will be coming for some parents when they file their 2021 tax returns, but only those with college-age kids may qualify.
The additional one-time payment is for parents with dependents who are 18 to 24 and are enrolled full-time at a university. The parents who qualify should also be paying part of their college expenses and have declared the young adults as dependents on their IRS profile.
Taxpayers with college-age dependent kids but earn more than $75,000 (single filers) or $150,000 (joint filers) won't be able to claim a full $500 child tax credit payment since there is an income threshold. According to Fatherly, parents with an income beyond this threshold will have reduced $50 payment for every $1,000 of their adjusted gross income.
Opt-Out For 18-Year-Old Dependents
Since the rollout in July, American families have benefitted from the $250 or $300 monthly child tax credit payment per child. However, some parents could be making a mistake in claiming an extended monthly child tax credit payment for their 18-year-old dependents when they should be under the extra one-time refund.
According to Rep. Steve Cohen, a child turning 18 years old in 2021 is no longer eligible for the $250 or $300 monthly payments, three of which have been rolled out in July, August, and September.
"However, the American Rescue Plan did provide for a one-time credit of $500 for dependent children aged 18 and for dependent full-time college students aged between 19 and 24," he said.
Parents still have time to opt-out of the succeeding monthly payments for October, November, and December using the Child Tax Credit Portal to correct this mistake. They'll have to wait for the adjustments and the reconciliation of the actual refund when they file their taxes in 2022. If they fail to opt out, they may have to pay back the IRS next year.
Parents need to remember that the IRS has been referring to the taxpayers' 2020 or 2019 tax returns to disburse the payment. So, if these are not updated with the correct details of the dependents, there could be problems with the eligibility.
Child Tax Credit Helping Families
Meanwhile, the Arizona Center for Economic Progress released a report showing that the first two months of child tax credit payments have extended significant relief for families in times of great need. The refund has alleviated economic hardships among 2.4 million households, with one or both parents losing their jobs because of the pandemic.
Mayor Kate Gallego said that the initiative brings a "world of good" when governments invest in children. Over $352 million child tax credit payments were distributed among Arizona families in August, which many parents used for food, school supplies, utilities, and debt payments.
Because of the feedback on child tax credit payments, Democrats are working out a plan to extend this to 2025. However, Congress will still deliberate on this matter as it involves billions of the federal budget.
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