The extra $300 a month from child tax credit payments is nice—but here's why you should consider opting out before August 2, according to experts.

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The first child tax credit (CTC) payment went out last week, and parents around the nation were very excited—so much so, that #childtaxcredit with parents' reactions to the CTC check blew up on TikTok, with some parents even thanking "Daddy Biden" for the extra bump in their accounts.

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Credit: Getty Images.

With 2021's CTC, parents who qualify can receive up to $3,000 for each child under 18, and $3,600 for each child under 6 years old—and will get half of that credit amount in advance between July and December of this year. That's an extra $250 or $300 in your account every month for the next six months—that is, if you choose to. While getting an extra $1,800 as a parent never hurts, there are some good reasons to consider opting out of the child tax credit. But you might want to decide soon, because the deadline to opt out of future CTC payments is August 2nd. Here are reasons opting out of the child tax credit could be a better option for you—and how to do it.

Opt out of the child tax credit if:

You are expecting your income to increase this year.

If you or your spouse (if you're filing jointly) are expecting a significant change to your incomes this year that would no longer qualify you for the CTC, it would be wise to opt out. This is because you will likely have to pay back any overpaid amount, says Beth Logan, EA at Kozlog Tax Advisers. So if your adjusted gross income in 2020 was less than $75,000 (single) or $150,000 (filing jointly) and you expect your income this year to exceed that, you're better off opting out. The same applies if your income goes from below $200,000 ($400,000 if filing jointly) to above, as benefits decrease at this income level too.

You want to reduce your 2021 taxes or get a bigger tax refund.

The CTC is an advanced payment of what you would have otherwise received in 2022, when you file this year's taxes—so opting out of the CTC advanced payments could reduce the amount you end up owing next year.

"If you are expecting to owe come tax season, or if you'd rather get a larger refund with the Child Tax Credit paid out as a lump sum, it may also be a good idea to consider opting out," says Kumiko Love, founder of The Budget Mom blog.

If you're making estimated tax payments, consider opting out of the CTC as well. Logan suggests basing your taxes on your 2020 tax liability: "If your total 2021 withholdings plus estimated taxes is at least your 2020 tax liability, then you will not have a penalty." Taking the advanced CTC payments will make it more difficult to calculate the estimated taxes you owe and avoid penalty.

Your dependent status will change next year.

If you will not qualify for the child tax credit in tax season 2022 due to dependent changes, it's best to avoid the advance payment, or you will most likely have to pay that amount back.

"The IRS may require you to repay some or all of the monthly child tax credit payments...if your dependent status changes," says Kemberley Washington, CPA and tax analyst with Forbes Advisor. If you have kids that will no longer qualify by the time tax season rolls around next year (e.g. they're turning 18), choosing not to receive the CTC payments will save you money. However, there is a full repayment protection safeguard the IRS has in place that exempts families who earn under a certain income from having to pay back the credit, says Washington.

Logan advises that most divorced couples who alternate claiming a child each year should opt out of the child tax credit as well. If you claimed your child last year, but will not this year, then you would have to pay all of the credit back—unless you earn less than $40,000.

For those who coparent, the person who claims the child will qualify for the payment, as long as the child also meets qualifications (such as living with the parent for more than one half the year).

To opt out of the CTC, go to the IRS child tax credit update portal. If you're filing jointly with your spouse and would like to opt out of the CTC, both of you must unenroll separately. "If you do not, the spouse who did not unenroll will receive half of the qualified payment," says Washington.

Remember: You can still claim the child tax credit next year if you qualify, instead of getting half of it in installments that you may have to pay back in case of overpayment. If you decide to opt out of the monthly payments, make sure you do it three days before the first Thursday of the month—to opt out starting next month, do it before August 2.