The recently enacted $1.9 trillion American Rescue Plan Act implemented some hefty changes that will have U.S. families receiving some extra cash in 2021. In addition to the stimulus checks delivered to millions of eligible Americans, the American Rescue Plan Act introduces another direct payment to families through the expansion of the Child Tax Credit. We’ve assembled some of your most frequently asked questions and have provided answers below.

1. What were the 2020 child tax credit rules?
For 2020 tax returns, which are now due May 15, 2021, the child tax credit is worth $2,000 for every child under the age of 17 claimed as a dependent on your return. If your adjusted gross income (AGI) is more than $400,000 on a joint return or more than $200,000 on a single or head-of-household return, your credit amount is reduced. Additionally, you must have at least $2,500 of earned income to get any refund at all.

2. What’s changing for 2021?
Thanks to the American Rescue Plan Act, the credit is massively expanded in the following ways:

  • It increases the credit to $3,000 per child ($3,600 per child under the age of 6).
  • It allows 17-year-old children to qualify for the credit.
  • It makes the credit fully refundable and removes the $2,500 earnings qualification.
  • It requires the IRS to pay half of your credit in advance by sending periodic payments from July 2021 to December 2021.