Should I Opt Out of the Child Tax Credit?
The child tax credit is a refundable tax credit for eligible families. While you may want to claim the child tax credit, it may be a good idea to opt out of it. Here’s a closer look at what the child tax credit is, how it works, and why an opt-out might make sense.
How the child tax credit works
Created to help taxpayers support their families, the child tax credit is $3,000 for children under age 18 and $3,600 for children under age 6 for the year 2021. Not only is the tax credit fully refundable, but you can also receive it early through advance payments.
You may qualify for the child tax credit if your modified adjusted gross income is under $75,000 as a single filer, $150,000 for married filing jointly, and $112,500 for a head of household filer.
Pros and cons of the child tax credit
Before you take the child tax credit, it’s important to consider these pros and cons:
Pro: Provides monthly funds
With the child tax credit, you can receive monthly checks over 2021 and 2022 as advance payments. This may be beneficial if you could use some extra cash every month.
Pro: You don’t have to wait to receive the credit
The 2021 child tax credit allows for advance payments so you can get the money before you file your 2021 tax return. Depending on the ages of your child or children, you may automatically collect $250 or $350 on a monthly basis.
Con: Tax refund impact
Claiming the child tax credit may affect your tax refund. If you’d like a larger refund when you file your 2021 tax return, you may want to opt out of advance payments.
Con: You may have to repay the credit
While you don’t have to repay your stimulus checks, you may have to pay back your monthly child tax credit. This will likely happen if you get too much money from the IRS.
Should I opt out of the child tax credit program?
There are several reasons why you might want to opt out of the child tax credit. Opting out can be a good choice if you prefer one large payment instead of multiple smaller payments spanning over 2021 and 2022. This may be the case for you if you’d like to save for a big expense or are used to a larger refund at tax time. Also, if you’re self-employed and want to make sure your estimated tax payments are correct, it may be smart to opt out.
How to opt out of the child tax credit
To opt out of the child tax credit, follow these steps.
- Go to the Child Tax Credit Update Portal on the IRS website.
- Create an account if you don’t already have one.
- Check to see if you’re enrolled in advance payments.
- If you’re enrolled, unenroll.
Note that if you’re married and file a joint tax return, you and your spouse will both need to create an account and opt out.
Alternatives to the child tax credit
Advance America offers loan options that can be a good alternative to the child tax credit payments. You can choose from payday loans, installment loans, title loans, and lines of credit. Once you apply online, you may receive your funds quickly, sometimes within 24 hours. Better yet, you don’t need great credit to get approved. Visit Advance America today to learn more about our loans.