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Starting July 15, parents will be eligible to receive a new monthly payment for each child thanks to a new federal law.

Called an advanced child tax credit, the monthly payments are connected to your income taxes. If eligible, parents may receive half of their annual tax credit money in the form of monthly payments. Parents will receive the other half of the credit when they file their income tax returns.

Part of the American Rescue Plan, which President Joe Biden signed in March, the new advance payments add to the child tax credit, which has existed in some form since 1997. The amount has increased over the years and will increase again with the new program on July 15. For now, the advance payments and increased amounts run through Dec. 15, 2021.

Here’s everything you need to know about the payments parents will start receiving in just a few weeks:

What is the advance child tax credit?

The new advance child tax credit pays parents part of the tax credit they will receive at the end of the year in monthly installments. Parents will then report that they have received these payments — and will claim the other half of the credit — when filing their tax return in April.

A tax credit is the amount you are allowed to subtract from the income taxes you owe to the government. For example, if you are eligible for a $1,000 tax credit and you owe $3,000 in income taxes, the amount you owe in taxes is reduced to $2,000.

Parents with children under age 6 are eligible for up to $3,600 per child, or $300 per month. Parents with children from ages 6-17 are eligible for up to $3,000 per child, or $250 per month with the advance payments. For now, though, these increased amounts and advance payments are set to expire at the end of 2021.

Michael Jamison, president of OnTarget CPA, said the government sees these tax credits as a way to support parents, offset costs associated with having children and provide “some level of support for children throughout the year.”

How is the advance child tax credit different from the child tax credit that exists right now?

Previously, parents were able to claim the tax credit in full only when filing taxes. The advance payments, which offer half the credit in monthly installments and half available to be claimed in April or whenever tax returns are filed, are new.

This tax credit amount has increased, from $2,000 for all children to $3,600 for children under the age of 6 and $3,000 for children between the ages of 6 and 17.

Currently, the new tax credit program is set to end at the end of 2021 unless a new law is passed.

Who is eligible for the advance child tax credit?

Parents with at least one child under the age of 18 who meet the income requirements are eligible for the full credit.

To qualify for the full tax credit, filers must make less than $75,000 if filing alone, less than $150,000 if filing jointly as a married couple and less than $112,500 for “head of household” filers, such as unmarried single parents.

“If you make more than that, it doesn’t mean you won’t get any of that credit; it just gets reduced down to a lower amount,” Jamison said.

If you make more than the maximum income to qualify for the full amount, your tax credit will be reduced by $50 for each $1,000 your income exceeds the maximum until the credit amount reaches $2,000.

If your income is $400,000 filing jointly or $200,000 filing alone, the second phaseout begins. The second phaseout reduces the tax credit amount by $50 for every $1,000 your income exceeds $200,000 or $400,000, depending on the circumstances.

You also must reside in the United States for at least six months of the year, and the child must live with the parent claiming the child as a dependent for at least half the year.

Your child must not turn 18 before Jan. 1, 2022, for you to be eligible for the credit. If you welcome a child at any time in 2021, you will be eligible for the full credit, Jamison said.

How much will the payments be?

Under the full tax credit, monthly payments will be $300 per child under age 6 and $250 per child ages 6 to 17.

These payments will amount to half of the credit: $1,800 for younger children, and $1,500 for older children. Parents will claim the other half of the tax credit when filing taxes.

The advance payments and increased amount are currently set to end at the end of 2021. Without new legislation, the tax credit will revert back to $2,000 per child, with no advance payment option.

How do I receive the advance child tax credit payment?

You can receive the advance child tax credit payment either by direct deposit or by check.

If you have previously set up direct deposit with the IRS, then you will receive payments in that bank account. To check your eligibility and bank account information, you can visit the child tax credit update portal. If you enrolled to receive direct deposit, you should see your routing number and the last four digits of your account listed in the portal.

All payments, including the July 15 payment, will be delivered by direct deposit if you are signed up. To change account information for the August payment, you can update your account information on the portal.

The payment cannot be split between accounts, and there is only one account number allowed per recipient.

If you are not signed up for direct deposit, then you will receive a check. To switch from receiving checks to direct deposit, you can add your bank routing number and bank account information in the portal.

The IRS encourages families to set up direct deposit in lieu of receiving checks because parents will get the money faster and it will eliminate the risk of lost or stolen checks, according to their website.

How do I claim the advance child tax credit on my taxes?

To balance this out on your taxes, you will need to claim and keep track of the advance payments you receive in 2021. Then you will report the amount and reconcile it with the amount you are eligible to receive on your tax return.

“The amount that you get needs to be input into your tax return,” Jamison said. “So the amount of an advanced payment that you receive … you’d want to make sure that you’re indicating that when you file that return.”

When will I receive the payments?

For those who are eligible and have not opted out, the first payments will start July 15.

The payment schedule is set for the rest of the year. Families will receive payments on these dates: July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15.

Is it better to opt out of the monthly payments?

It depends. If your eligibility will change during the year–for instance you receive a raise –then it could be better to wait and claim the full amount when you file your tax return, Jamison said.

If another family member (such as an ex-spouse) qualifies to claim your child as a dependent, or you reside outside the U.S., you also may want to opt out.

It’s too late to opt out of the monthly payments for July, but families can opt out of the August payments by Aug. 2.

If you want to opt out of the monthly payments and claim your full amount when you file your tax return, you can unenroll on the child tax credit update portal.

If you don’t opt out of this advanced credit and your eligibility changes, you may end up having a balance due when you file your return. However, if you opt out of the monthly payments, you will be able to still receive the full tax credit based on your 2021 income when filing your income tax return, Jamison said.

“It’s not like you’re gonna lose out on it,” Jamison said. “You’re just (going to) get all that money with your tax refund instead of getting that in advance.”

How long will the advance child tax credit payments last?

As of now, the advance payments of the child tax credit are scheduled to go only through the end of 2021.

“Obviously Congress could choose to extend (or) change whatever they do for 2022,” Jamison said. “But this currently is only through the end of the year. And then next year, it reverts back to the regular.”

Do I have to apply or sign up to receive the advance child tax credit?

No. You are automatically eligible for the child tax credit if you meet the requirements and if you filed your taxes in 2020.

If you didn’t file your taxes in 2020, you can still file your back taxes to receive the advance child tax credit payments.

If you did not qualify to file taxes in 2020 but are eligible for the tax credit, you can use the IRS’ Non-Filer sign-up tool. To use the tool, you will need to provide your personal information, including your name, mailing address, date of birth, and Social Security or taxpayer ID numbers for you and your dependents.  You will also need to provide your bank account and routing numbers and Identity Protection PIN from the IRS, if applicable.

Do you have to pay back the advance child tax credit?

Generally, no, unless you claim more than what you actually qualify for based on your income.

Jamison recommends opting out of the advance payments if your income will increase and change your eligibility. If you receive the advance payments and your eligibility changes, you may owe money to the IRS when it comes time to file your tax return.

“What (the government is) doing is they’re giving you this money, based on the amount of earnings you had in 2020,” Jamison said. “But they don’t know yet how much you’re gonna earn in 2021. So if you do earn more, then there’s a chance you’re gonna have to repay this advanced amount.”

Are dependents 18 and older eligible for the advance child tax credit?

No, however, parents with adolescent children may be eligible for other tax credits, Jamison said.

Under the March stimulus package, families with children who are 18 or full-time college students aged 19-24 whose parents or legal guardians claimed them as dependents will receive a one-time tax credit of $500 in April 2022, when parents file their 2021 income tax returns.