Will Child Tax Credit Payments Impact Your Taxes?

July and August Child Tax Credit (CTC) prepayments have now been distributed to qualifying families across the country. The cash payments were added as part of the myriad of relief enacted through the American Rescue Plan of 2021 (ARPA).

ARPA expanded the Child Tax Credit to $3,600 per child under 6, $3,000 for children ages 6 to 17, and $500 for 18-year-old children or full-time students who are 19 to 24. Under the new plan, eligible taxpayers receive half of the credit in monthly installments from July through December 2021 and half of the annual credit when filing 2021 taxes.

The remaining payments will be distributed on September 15, October 15, November 15, and December 15.

While the extra cash may be nice in the short term, some families may see significant impacts on their tax liability when it’s time to file 2021 tax returns.

Who is eligible?

To be eligible for the full credit, taxpayers must meet the annual income requirement of $75,000 or less if filing individually and $150,000 or less if married filing jointly. Eligible families will receive six payments of up to $300 per child under 6 and up to $250 per child 6 to 17.

Will the prepayments impact taxes?

The tax payments will be automatically sent by check or direct deposit to all eligible taxpayers based on recent tax return information, so it’s possible that there will be some overpayments of the credit. Taxpayers who have an increase in income and eligibility in 2021, usually receive a large refund, or typically break even may also end up owing the IRS in April.

Can you opt out?

Because of the potential impact on taxes, it may be wise to opt out of the advance payments or at least set some of the money aside.

The IRS created an opt-out portal for taxpayers who do not want the monthly payments and would like to take advantage of the full credit when filing taxes.

To unenroll from advance payments:

  • Visit the IRS Child Tax Credit Update Portal.
  • Use existing IRS username or ID.me or enroll for a new one with photo ID.
  • If you are married and filing jointly, you must unenroll both spouses.
  • Unenroll at least three days before the first Thursday of the next month.
    • August 30 for September payment
    • October 4 for October payment
    • November 1 for November payment
    • November 29 for December payment


Each situation is different. If you have questions about how these payments could affect your taxes, please reach out to the professionals at Harris, Hardy & Johnstone, P.C. We can help maximize your tax benefits while remaining compliant with current law.