Child tax credit

The money is intended to help you support your children.    The amount of the child tax credit increased for 2021  and is structured so that you are getting half of it between July and the end of 2021 and the other half as a refundable credit when you file your 2021 tax return.

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-a-general-information

The Advance will be reconciled on your tax return and any excess amount received will be “paid back”.  For example, if you received $3,000 in advance but you only qualified for $2,000 of CTC then $1,000 would be paid back.

There is a safe horbor (i.e. not having to pay back the excess advance) for the following income ranges: Married Filing Joint $60,000, Head of Household $50,000, Single or Married Filing Sperate $40,000. The calculation for the amount to be paid back is rateable from the base limit to 200% of the base limit.  Safe Harbor only applies if the number of qualified children for the Advanced CTC was greater than the number of qualified children claimed on the 2021 tax return.

Whether you should save or spend the payments you receive will depend on your personal tax situation. If you foresee any significant changes to your tax situation or age of your children in 2021 you may want to be more conservative in what you do with the payments you receive.