Child Tax Credit FaqsPublished:
Answers to Frequently Asked Questions About the 2021 Child Tax Credit & Advance Child Tax Credit Payments
The Child Tax Credit (CTC) is a federal tax credit designed to help people with children save money on their taxes. This article provides answers to the most frequently asked questions about the Child Tax Credit, and includes information about temporary changes to this credit that may affect your 2021 income tax return (Form 1040 or Form 1040-SR).
What Is the Child Tax Credit?
The Child Tax Credit is available to qualifying individuals who claim a child as a dependent on their tax return, if the child meets additional conditions. The Child Tax Credit can be claimed in addition to the Credit for Child and Dependent Care Expenses as well as the Earned Income Tax Credit (EITC).
Typically, the Child Tax Credit is available to taxpayers with qualifying children who are age 17 or younger. It is normally a partially-refundable tax credit that allows people to claim up to $2,000 per child – with up to $1,400 of that amount being refundable for lower-income families.
For more information, see IRS Publication 972 (Child Tax Credit and Credit for Other Dependents).
How Is the Child Tax Credit Different for 2021?
The American Rescue Plan Act (ARPA) of 2021 made several temporary changes to the Child Tax Credit that apply to tax year 2021. These changes include the removal of the income threshold, an adjustment that makes it fully refundable for lower income households, an increase in the amount that can be claimed for each child, and advance monthly payments for many families.
For 2021 only, the maximum amounts you can claim for the Child Tax Credit is up to $3,600 for each younger child (under age 6) and up to $3,000 for each older child (between ages 6 and 17). Additionally, half the total credit amount is being paid in advance monthly payments – and the other half can be claimed when you file your 2021 tax return. Advance payments are sent automatically to eligible people, which means you do not need to take any action if the IRS already has your tax information on file.
RELATED: The Expanded Child Tax Credit
Who Is Eligible for Advance Payments of the Child Tax Credit?
According to the IRS, in order to qualify for advance payments of the Child Tax Credit, you (and your spouse if you filed a joint return) must have:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on your return, or
- Given the IRS your information in 2020 to receive the Economic Impact Payment (a.k.a. stimulus check) with the IRS “Non-Filers: Enter Payment Info Here” online tool, or
- Given the IRS your information in 2021 with the IRS “Non-Filer: Submit Your Information” online tool; and
- Lived in a main home in the United States (i.e. the 50 states and the District of Columbia) for more than half the year or filed a joint return with a spouse who has a main home in the United States for more than half the year; and
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
- Made less than certain income limits.
How Is the 2021 Child Tax Credit Calculated?
For tax year 2021, the maximum Child Tax Credit amount is increased (from $2,000 per qualifying child) to:
- $3,600 for children ages 5 and under at the end of 2021; and
- $3,000 for children ages 6 through 17 at the end of 2021
Note that the $500 non-refundable Tax Credit for Other Dependents amount has not changed. For more information about the Credit for Other Dependents, see IRS Publication 972 (Child Tax Credit and Credit for Other Dependents).
RELATED: Tax Tips for 2021
How Are the Advance Child Tax Credit Payments Calculated?
The IRS determines your advance Child Tax Credit payment amounts by estimating the amount of the Child Tax Credit that you will claim on your 2021 tax return during the 2022 tax filing season. The IRS’s estimate of your 2021 Child Tax Credit is based on information shown on your processed 2020 tax return. If the IRS has not processed your 2020 tax return when it determines the amount of your advance Child Tax Credit payment for any month starting July, the IRS will estimate the amount of your 2021 Child Tax Credit based on information shown on your 2019 tax return (including information you entered into the Non-Filer tool on IRS.gov in 2020). Once the IRS has processed your 2020 return, it will recalculate your advance Child Tax Credit payments and adjust any remaining monthly payments.
Can My Child Tax Credit Amount Be Reduced Based on My 2021 Income?
Your Child Tax Credit amount can be reduced based on the amount of your 2021 income.
Yes. The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI) in 2021.
The first phaseout can reduce the Child Tax Credit to $2,000 per child.
That is, the first phaseout step can reduce only the $1,600 increase for qualifying children ages 5 and under, and the $1,000 increase for qualifying children ages 6 through 17, at the end of 2021.
The second phaseout can reduce the remaining Child Tax Credit below $2,000 per child.
How Do I Manage My Child Tax Credit Payments?
There are several online tools available on the IRS website to help you check your eligibility and manage your Child Tax Credit payments.
Use this tool to:
- Check if you’re eligible and/or enrolled for advance payments
- View your bank account and mailing address
- View your payments
Child Tax Credit Update Portal: Manage Payments
Non-Filer: Submit Your Information
If you aren’t required to file a tax return and haven’t given the IRS your information already, you will need to provide some basic information for the Child Tax Credit.
Child Tax Credit for Non-Filers: Sign-Up Tool
Check If You’re Eligible
Check if you may qualify for advance monthly payments of the Child Tax Credit.
Advance Child Tax Credit: Eligibility Assistant