Americans have been receiving some form of a Child Tax Credit since the late ’90s, and most recently that meant a $2,000 credit at tax time for every dependent aged 17 and younger.
Then came the COVID-19 pandemic and all the financial hits that people across the country suddenly faced. Among the relief efforts designed to put more money in American pockets when they needed it most was a change to the Child Tax Credit.
For 2021, the credit jumped so that it now ranged from $3,000 to $3,600 for each dependent. Then in another twist, from July through December 2021, the IRS started sending out advances on the tax credit.
So what’s it all mean for you when it comes to filing your taxes? The IRS has put together a full Q&A breaking down all of the most common questions that taxpayers have this year. It’s worth a read. But in the meantime, here are some of the highlights.
What is the Child Tax Credit for 2021?
The Child Tax Credit is a fully refundable tax credit for families with qualifying children. The American Rescue Plan expanded the Child Tax Credit for 2021 to get more help to more families. The credit increased from $2,000 per child in 2020 to $3,600 in 2021 for each child under age 6. Similarly, for each child age 6 to 16, it’s increased from $2,000 to $3,000. It also provides the $3,000 credit for 17-year-olds. Under the American Rescue Plan, the IRS disbursed half of the 2021 Child Tax Credit in monthly payments during the second half of 2021.
The advance Child Tax Credit payments disbursed by the IRS from July through December of 2021 were early payments from the IRS of 50 percent of the amount of the Child Tax Credit that the IRS estimated you may properly claim on your 2021 tax return during the 2022 tax filing season.
How much of the Child Tax Credit can I claim on my 2021 return?
This amount will depend on the following factors:
- You received advance Child Tax Credit payments for a qualifying child. You may have received a portion of your Child Tax Credit through advance Child Tax Credit payments during 2021. Generally, the total amount of advance payments for each of your qualifying children equaled 50 percent of the amount of the credit that the IRS estimated you would be eligible to claim on your 2021 tax return for those children. For information on how the IRS estimated the amount of your advance Child Tax Credit payments, see Q A4.
- You didn’t receive advance Child Tax Credit payments for a qualifying child. If you didn’t receive one or more monthly advance Child Tax Credit payments in 2021 for a qualifying child, you can still receive those payments – and the remaining amount of your credit – by claiming the Child Tax Credit for that child when you file a 2021 tax return during the 2022 tax filing season. This includes families who don’t normally need to file a return.
- Your family experienced life changes during 2021. Changes throughout 2021, such as a change in filing status, change in the number of your qualifying children, or a change in your income could increase or decrease the amount of Child Tax Credit you are eligible to claim on your 2021 tax return. Families who received advance Child Tax Credit payments will need to compare the advance Child Tax Credit payments that they received in 2021 with the amount of the Child Tax Credit that they can properly claim on their 2021 tax return.
Will the amount of my Child Tax Credit be reduced if my income is too high?
Yes, if your 2021 income is high enough, the amount of Child Tax Credit you can claim will be reduced. The amount of your Child Tax Credit will not be reduced if your 2021 modified adjusted gross income (AGI) is at or below:
- $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
- $112,500 if you are filing as a head of household; or
- $75,000 if you are a single filer or are married and filing a separate return.
Visit the IRS website for a complete list of Child Tax Credit questions and answers.