What the new monthly child tax credits mean for you and your family

Roughly 39 million American families are eligible for monthly payments of up to $300 through the newly expanded child tax credit starting on July 15, the IRS and U.S. Treasury Department announced on Monday.

The advance child tax credit program is part of the Biden administration's $1.9 trillion economic aid package called the American Rescue Plan that was passed in March. It increases the existing tax benefit from $2,000 up to $3,600 for younger kids and $3,000 for older ones, for the 2021 tax year.

"For working families with children, this tax cut sends a clear message: Help is here," said President Joe Biden in a Monday statement.

How does it work?

Instead of forcing parents to wait until the following year — after filing annual income taxes — the relief checks are an advance on half what they'd typically be entitled to get.

In this case, eligible families qualify for up to $300 per month for each child under 6 years old and up to $250 for each child from 6 to 17. So a family with three children ages 5, 7 and 16 could see an extra $800 per month in their bank account through the latter half of the year. The credit goes away once a child reaches 18.

The amounts could be smaller depending on the parents' income and the IRS said final payment amounts will be determined by 2020 tax returns (or 2019 filings if the 2020 documents have not been processed in time) and it urges those who have yet to file to do it as soon as possible to make sure they're eligible for the appropriate amount.

Deposits will be made from July through December. The payments that represent the first half of 2020 will be provided later in a lump sum. Payments will be automatically deposited into accounts on file with the IRS, without any additional action required.

But the boost is temporary. "Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come," Biden said.

Who is eligible?

Biden estimates that "about 90 percent of families with children will get this new tax relief automatically."

The IRS offered more concrete guidelines: Married parents filing joint returns, as well as qualifying widows or widowers with incomes under $150,000 are eligible for the full refunds. The increased amounts will be reduced for couples with incomes above that, according to the IRS.

Parents who don't come under the married or widowed categories can make up to $112,500 if they are heads of households and $75,000 for all other individual taxpayers before the benefit is reduced.

People who don't make enough money to pay income taxes can also expect to see more money this year. Under the new tax credit low-income parents will no longer be docked for part of the credit as they currently are and the poorest families, who typically don't benefit from it at all, will also qualify for the full amount.

Can I opt out?

Yes.

The IRS said eligible taxpayers who don't want the advance payments and instead would like to save the full child tax credit until next year will be able to decline the checks.

"Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children," the agency said, adding an online portal will become available sometime before July 15.

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