Child Tax Credit

$3000/$3600 Child Tax Credit: Should I opt out if I am earning more money in 2021?

Opting out of the credit could be be beneficial if your your 2021 tax return will put you above the threshold.

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$3000/$3600 Child Tax Credit: Should I opt out if I am earning more money in 2021?
Frederic J. Brown AFP

More than 35 million families across the US have received the first payment of the Child Tax Credit. For many the $300 per child is useful support through the pandemic. But if you know your salary will increase over the threshold by the end of the 2021 financial year, opting out of the credit could prevent you from some nasty repayments down the road.

The salary limits on Child Tax Credits

Households with adjusted gross income at or below $40,000 on a single tax return, $50,000 on a head-of-household return, and $60,000 on a joint return won't have to repay any overpayments on the Child Tax Credit that they receive. However, those households making at or above $80,000, $100,000, and $120,000, respectively, will need to repay the entire amount of overpayment. For households with earnings in between these thresholds, they will need to repay a portion of any overpayments received.

Why opting out may be useful for your family

Opting out if you know your household will be making these figures will stop you from having to repay the credit in April. Potentially you could be repaying $3,600 per child in April and for many families this will be unaffordable. 

The Child Tax Credit is not considered income so it's not worht opting out of the scheme for tax reasons.

Once you have opted out there is currently no way to opt back in but the IRS says the portal should have this feature in September.

You are still eligible for payment if you have opted out

Opting out doesn't withhold you from receiving the credit. If come April you are earning under the threshold you are still available to receive all the money you are owed once your taxes have been filed. For example, if you have a five year-old child and opted out today in fear of repayments, you would still be eligible for a lump sum of $3,300 in April.

So should you opt out?

If you know that your family has experienced a financial change which will put you at risk of repayments then it is a good idea to opt out. The money you are owed can still be claimed in April but without the risk of having to pay any back.

Child Tax Credit deadlines

Payment month
Deadline Date
Payment Date
July
28 June 2021
15 July 2021
August
2 August 2021
13 August 2021
September
30 August 2021
15 September 2021
October
4 October 2021
15 October 2021
November
1 November 2021
15 November 2021
December - Final Payment
29 November 2021
15 December 2021

You can opt out through the IRS portal here.