Things to consider before opting out of the expanded child tax credit
BIRMINGHAM, Ala. (WBRC) - Child Tax Credit payments will start going out in July but some people were planning to opt-out of getting it due to concerns about having to pay it back.
It’s much needed money that’s going to help a lot of families but under certain circumstances. According to UAB Political Science Professor Peter Jones, you could find yourself paying the money back.
The expanded child tax credit is increasing to $3,600 for children under age six and $3,000 for youth up to 18. The credit will also go out to more families in 2021 due to federal pandemic relief legislation. The payments are scheduled to begin in July 2021. However, some people were concerned they may end up getting a smaller return the following year or have to pay the money back.
Dr. Jones said under circumstances a person should consider not getting the extra money.
”If you’re going to claim somebody on your taxes in 2020 but not claim that person in 2021, then you may have to pay those taxes back,” Jones explained.
According to Jones, if your income increased substantially in 2021, you also may have to pay the money back.
”I would say most of those situations are pretty rare,” Jones said.
The payments are a pre-payment of a tax credit and those who normally don’t get a refund may also want to opt out, said Jones.
As far as concerns of the next year’s refund being smaller due to getting a portion of the child tax credit in increments, Jones says that should not be a concern.
”It’s not really a comparable circumstance to say that, ‘well I would’ve gotten this big refund and now because they’re paying it out earlier I’m not going to get it’,” said Jones.
He said that’s because the tax credit was increased to $3,600/$3,000 from $2,000 and the money paid out early is the increase difference and not the full amount, which should mean your return would not be impacted.
Jones advised before you opt-out of the benefit, seek professional advise because everyone’s financial situation is different.
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