IRS Child Tax Credit PaymentsPublished:
Eligible Families Received $300 Direct Monthly Payments
As of 2021, there were important changes made to the Child Tax Credit (CTC) that expanded eligibility and increased the amounts that could be claimed on your 2021 tax return. Additionally, some households received advance monthly payments for the Child Tax Credit.
Here’s what you need to know about the CTC and its revised rules for tax year 2021.
What exactly is the Child Tax Credit?
The American Rescue Plan Act (ARPA) of 2021 – also called the American Rescue Plan (ARP) – made several big changes to federal tax breaks for families, particularly the Child Tax Credit. These tax benefits were designed to help American households that had been struggling with the fallout of the COVID-19 pandemic.
President Biden signed the ARPA into law on March 11, 2021. This was the third major stimulus bill aimed at providing Coronavirus relief, and President Biden’s first big piece of legislation since he took office.
Under prior law, the CTC was available to eligible taxpayers with qualifying children and was typically worth up to $2,000 per qualified child – up to $1,400 of that was refundable for lower-income families (which classifies it as a partially refundable tax credit).
The American Rescue Plan of 2021 temporarily expanded the Child Tax Credit to provide direct relief to the most working families ever. This included the following amendments:
- The tax credit amounts increased for many taxpayers
- The tax credit for qualifying dependent children was fully refundable, which means that eligible taxpayers were able to benefit from the credit even if they did not have earned income or did not owe any income taxes.
- The tax credit included children who turn age 17 in 2021.
- Eligible taxpayers received part of their credit in 2021 before filing their 2021 individual tax return, as advance payments of the credit began in summer 2021.
According to the Center on Budget and Policy Priorities, 2021’s expanded Child Tax Credit reduced childhood poverty by approximately 30%. The Census Bureau’s Household Pulse Survey data also reports that parents had less trouble paying for food and household expenses after receiving CTC federal benefits.
However, the changes made to the extended credit applied to tax filing season 2021 (i.e. your 2021 income tax return) only. As of 2022, the CTC reverted back to $2000 per child under 17 without advanced monthly checks. Proposals to extend the new CTC for additional years as part of President Biden’s Build Back Better Agenda are being considered, but there are no further extensions to the credit as of this time.
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Who is Eligible for the Child Tax Credit?
To be eligible for the benefit program or to receive advance payments of the Child Tax Credit, you as Head of Household, or you and your spouse (if married filing jointly) must have:
- A qualifying child under the age of 17 (including foster children, siblings, step-siblings, grandchild, or adopted child).
- A qualifying child age 18 or younger by the end of 2021 who has a valid Social Security number and made less than certain income limits.
- Lived in or filed a joint return with a spouse who lived in a primary residence in the United States for over half of the calendar year.
- Filed a 2019 or 2020 tax return that claimed the CTC within the return, entered information in 2020 to receive economic impact payments (stimulus payments) with the IRS non-filer sign-up tool, or submitted information through the non-filer tool in 2021.
To view unique eligibility criteria for Advanced Child Tax Credit Payments in 2021, view the Internal Revenue Service website.
How much was the Child Tax Credit Worth, and was it refundable?
For tax year 2021 only, families claiming the Child Tax Credit on their 2021 tax return received up to $3,000 for each qualifying child who was between the ages of 6 and 17 at the end of 2021. Families with younger children received up to $3,600 per qualifying child who was under age 6 at the end of 2021. Under the prior law, the maximum amount of the CTC was $2,000 per qualifying child under the age of 17 at the end of the year.
The relevant section from Internal Revenue Service Revenue Procedure 2021-23 states, “Solely for taxable years beginning in 2021, section 9611 of the ARP increases the child tax credit under § 24 of the Code to $3,000 for qualifying children who have attained age 6 but not 18 by the end of the 2021 taxable year, and $3,600 for qualifying children who have not attained age 6.” The increased CTC amounts are reduced (i.e. phased out) for households with annual incomes over $150,000 for married taxpayers filed a joint tax return and qualifying widows or widowers, $112,500 for single-parent families (also called Head of Household), and $75,000 for all other taxpayers.
The American Rescue Plan temporarily made the CTC fully refundable for eligible low-income families, meaning that the credit could reduce income tax liability to below zero and result in a federal income tax refund. The relevant section from Internal Revenue Service Revenue Procedure 2021-23 states, “For taxable years beginning in 2021, the child tax credit is refundable for certain taxpayers up to $3,000 for each qualifying child age 6 or older and $3,600 for each qualifying child who has not attained age 6. A taxpayer is eligible for the increased refundable amount only if the taxpayer, or the spouse of a taxpayer filing a joint return, had a main home in the United States for more than half of the taxable year beginning in 2021 or was a bona fide resident of Puerto Rico for the taxable year beginning in 2021. For all other taxpayers, the refundable portion of the credit is limited to $1,400 under § 24(h)(5)(A).” The IRS encourages people with children to file their 2020 and 2021 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the Child Tax Credit, as well as any other tax credits they may qualify for – including the Earned Income Tax Credit (EITC) and the Child and Dependent Care Credit. Electronic filing (“e-file”) online and choosing the Direct Deposit option is the optimal way to get a faster tax refund and advance Child Tax Credit payments
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Advance Monthly Payments for the Child Tax Credit
The American Rescue Plan also included a provision that created advance monthly payments for households who were eligible for the Child Tax Credit. Starting in July 2021, eligible families received a monthly payment of up to $300 per child under age 6 and/or up to $250 per child between ages 6 and 17.
Advance Child Tax Credit payments for 2021 were sent regularly from July 2021 through December 2021 to eligible taxpayers who have a main residence in the United States for more than half the year. The total of the advance payments was worth up to 50% of the Child Tax Credit amount. The IRS estimated advance payments based on information that’s included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).
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It’s Not Too Late to Receive Child Tax Credit Payments
Advanced payments have been sent to eligible taxpayers for up to half of the 2021 Child Tax Credit. Although the tax relief checks are no longer being sent monthly, and the CTC has reverted back to its original status, you may still be eligible to get your credit in full. If you have missed the filing deadline and have not yet filed your 2021 return, you can still file to receive up to thousands of dollars in tax benefits.
For families regardless of filing status that have lower incomes and need a fast and efficient way to claim CTC stimulus payments, you can file a Simple Return to claim your money.
For those who want to find out if they are eligible for the additional CTC from 2021, you can file a full tax return to get the maximum refund. Consult with tax professionals for tax return preparation today to receive your credits.
Learn more at the Child Tax Credit official site and fill out your federal tax returns today to get your payments.