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The Expanded Child Tax Credit

Important Information About the 2021 Child Tax Credit: Advance Payments, Online Tools, & More

Thanks to recent temporary changes to the federal Child Tax Credit (CTC), many more families with children are eligible to claim the child credit and even receive advance monthly payments from the IRS.

Here’s what you should know about the expanded and enhanced Child Tax Credit.

What is the New Child Tax Credit (2021)

President Biden signed the American Rescue Plan Act of 2021 into law on March 11, 2021. This was the third major COVID-related stimulus bill, which provided a third round of stimulus checks and a temporary expansion to the Child Tax Credit, among other provisions. The new CTC provides the largest Child Tax Credit ever, providing money to support hard-working families by helping them afford the cost of child care, make ends meet, or to save for their children’s future.

The Child Tax Credit payments are not taxable, and will not affect other government benefits or monthly benefits your families may receive.

How does the Child Tax Credit affect Americans

The New Child Tax Credit helped people pay for basic essentials such as food and rent, as well as costs related to school, saving, and credit cards. For low-income families greatly affected by COVID-10, the CTC reduced food insecurity by 25% and showed dramatic reductions in child poverty rates, benefitting roughly 9 in 10 children across the country.

Due to the ability to be fully refunded, the CTC expansions also helped Americans make further steps toward racial equity by ensuring Black children and Latino children receive more credit compared to their White counterparts, as initially minority families earned too little to receive credit due to racial disparities affecting wages.

The Child Tax Credit also affects those who are taking steps to immigrate and become Americans but currently do not have a Social Security number, as they can be claimed as tax dependents by using an Individual Tax Identification Number (ITIN).

Who is Qualified

The Child Tax Credit (CTC) helps American families with qualifying children or dependents receive a tax break. Even if you don’t normally fill out a tax return, you might be able to claim the tax credit.

For tax year 2021, the Child Tax Credit is available to all households with qualifying children, regardless of income. You can claim up to $3,600 for each child under age 6, and up to $3,000 for children under age 6-17. The Child Tax Credit is also fully refundable for low-income families.

To qualify for the 2021 tax year, your child must:

  • Be your dependent (child, stepchild, eligible foster child, sibling, step-sibling, half-sibling, or a descendent such as a grandchild)
  • Be properly claimed on your tax return as your dependent
  • Be younger than the age of 18 end of the year
  • Be a United States citizen, national, or resident alien
  • Live with you for over half of the year
  • Provide less than half of their own financial support during the year
  • Not file jointly with their spouse for the tax year, or file it only to get a tax refund of withheld estimated tax paid or income tax

If you and each qualifying child meets all eligibility factors, you may qualify for the full amount of the 2021 Child Tax Credit if your annual income less than:

  • $75,000 if you are filing as single parents, or are married and filing a separate return
  • $112,500 if you are filing as head of household (single parent)
  • $150,000 if you are married filing jointly, or if you are filing as a qualifying widow or widower

However, parents and legal guardians with higher incomes may still be considered eligible families to claim a partial credit.

How to Claim the Child Tax Credit

To claim the Child Tax Credit on your return, enter your children, qualified children, and/or dependents on your Form 1040 and attach a completed Schedule 8812 form.

Advance Child Tax Credit Payments

The American Rescue Plan also allows for half of the Child Tax Credit to be paid out in advance monthly payments to eligible households. (The remaining half can be claimed on your 2021 income tax return.) Advance payments are worth up to $300/month for each child under age 6, and up to $250/month for each child ages 6-17.

According to the IRS, to qualify for advance Child Tax Credit payments, you (and your spouse, if you filed jointly) 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) using the “Non-Filers: Enter Payment Info Here” tool; and
  • A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file 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 under age 18 at the end of 2021 and who has a valid Social Security number; and
  • Made less than certain income limits.

The IRS will use the information you provided to determine if you qualify and automatically enroll you for advance payments. You do not need to take any additional action to get advance payments.

The IRS has scheduled the following dates for 2021 advance Child Tax Credit payments:

  • July 15
  • August 13
  • September 15
  • October 15
  • November 15
  • December 15

Monthly payments will be sent via Direct Deposit or by paper check in the mail.

How to Reconcile Your Advance Child Tax Payments on Your 2021 Tax Return

When your 2021 tax return is being filed, you will need to compare how much of the advance Child Tax Credit payments you received during 2021 with the amount of CTC you can properly claim on your 2021 return.

If you have an excess CTC amount, you can claim the remaining amount of your Child Tax Credit on your 2021 return.

If you received an excess advanced CTC payment amount, you may need to pay back the IRS part or all of that excess payment.

The total amount of advance Child Tax Credit payments disbursed to you in 2021 has been sent as Letter 6419 from the IRS. Please keep this letter for your tax records. as it may be needed in reference to filing your 2021 tax return.

Child Tax Credit: Online Tools & Help

Check Your Eligibility for the Child Tax Credit

Use this tool to check if you’re eligible for the Child Tax Credit and if you qualify for advance payments.

You will need your tax return that you filed for 2020 (or your 2019 tax return if you haven’t filed for 2020). If you don’t have a copy of your past return, but you know your filing status and the number of qualifying children you claimed, you may be able to estimate the total income from your tax return to answer all the questions. You can use the following to make estimates:

  • Income statements such as W-2s and 1099s
  • Amount of any expenses or adjustments to your income

Note that you may still be able to benefit from the credit even if you aren’t working now or didn’t work in 2020.

>> ONLINE TOOL: Advance Child Tax Credit Eligibility Assistant

IRS Non-Filers: Submit Your Information

Use this tool to submit your information for the Child Tax Credit. 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 this credit.

You should use this tool to report your qualifying children ages 17 and under if you:

  • Are not required to file a 2020 tax return, didn’t file one and don’t plan to; and
  • Have a main home in the United States for more than half of the year.

Also, if you did not get the full amounts of the first and second stimulus checks, you may use this tool if you:

  • Are not required to file a 2020 tax return, didn’t file and don’t plan to, and
  • Want to claim the 2020 Recovery Rebate Credit and get your third Economic Impact Payment.

>> ONLINE TOOL: Sign-Up for Non-Filers

Manage Payments for the Child Tax Credit

Use this tool to check if you’re enrolled to receive payments, un-enroll to stop getting advance payments, and provide or update your bank account information for monthly payments (starting with the next scheduled payment date). Note that in the coming months, you will be able to use this tool to make other updates that affect your tax credit payments.

>> ONLINE TOOL: Manage Child Tax Credit Payments

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