When You Can Opt Out of Monthly Child Tax Credit Payments — And Why You Might Want To
The first installment of the monthly child tax credit payments is scheduled to start hitting millions of bank accounts on July 15. This advance credit consists of half of the total credit — i.e., $1,800 of the $3,600 credit per child under age six and $1,500 of the $3,000 credit per child ages six to 17 — paid to eligible families in six monthly installments of $250 or $300. The IRS will issue the payments from July through December, and parents will claim the remaining half of the credit next year during tax time.
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There are several reasons why you might choose to un-enroll from these automatic payments. Eligibility for child tax credit payments are based on your 2020 tax return. If you or your spouse’s income increases in 2021 to surpass the income threshold for the child tax credit, it is likely you will then have a tax bill and owe the IRS money. The income threshold for the full credit is $75,000 for individual filers and $150,000 for joint filers.
Personal preference can also be a reason for opting out. If you prefer to receive one lump sum next year versus several small payments and a smaller lump sum next year, it could be a good idea to opt out of the monthly payments now. Keep in mind that this means you will have to wait until your 2021 return is processed to receive this money.
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Opting Out
You can opt out any time this year and stop receiving your monthly payments. This means you can receive your first payment in July, then change your mind and opt out for the remaining monthly payments. However, the IRS says you must opt out three days before the first Thursday of the month in order to not receive the next month’s payment. By this rule, it is too late to opt out of the July 15th payment if you have not done so already. Should you miss this deadline one month, you will receive the following month’s payment while the IRS processes your request to unenroll.
If you’re married, you and your spouse both must unenroll. Otherwise, the spouse who remains enrolled will receive half the joint payment you’re eligible for.
Important to note: Once you unenroll, you cannot re-enroll until late September. You will receive any unpaid credit — i.e., the payments due while you were unenrolled — as a lump sum after you file your 2021 tax return.
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This article originally appeared on GOBankingRates.com: When You Can Opt Out of Monthly Child Tax Credit Payments — And Why You Might Want To
