2021 Child Tax Credit: Definition, FAQs & How to Claim – NerdWallet

What is the child tax credit?

The child tax recognition, or CTC, is an annual tax citation available to taxpayers with qualifying pendent children. It was first introduced as part of the Taxpayer Relief Act of 1997 and has played an crucial function in providing fiscal support for american english taxpayers with children. The tax credit — normally up to $ 2,000 per qualifying dependent — was expanded to a maximum of $ 3,600 in 2021 as separate of the American Rescue Plan ( the coronavirus easing box that took effect in March ). And, for the first time in U.S. history, many taxpayers besides received half of the credit as advance monthly payments from July through December of 2021.

Nerdy tip:

By the end of January, all recipients of the advance child tax credit payments should receive Letter 6419, which will provide a breakdown of all the advance payments disbursed to you. The IRS has asked taxpayers to use the letter to reconcile the credit on their 2021 returns. If you suspect your Letter 6419 states an inaccurate advance payment total, the IRS advises visiting your IRS online account for the most up-to-date information.

Who qualifies for the child tax credit?

For the 2021 tax year, you can take full advantage of the expanded citation if your modified adjusted gross income is under $ 75,000 for individual filers, $ 112,500 for heads of family, and $ 150,000 for those married filing jointly. The credit begins to phase out above those thresholds .

  • first phaseout : Income exceeds the above thresholds but is below $ 400,000 ( marry filing jointly ) or $ 200,000 ( all other file statuses ). Your entire credit per child can be reduced by $ 50 for each $ 1,000 ( or a fraction thence ). This phaseout will not reduce your credit below $ 2,000 per child .
  • second phaseout : Income exceeds $ 400,000 ( marry file jointly ) or $ 200,000 ( early file statuses ). The phaseout will continue docking $ 50 per each $ 1,000 and begin to reduce your credit per child below $ 2,000. You may be disqualified from the accredit raw .

Some of the early eligibility requirements for the child tax credit include :

  • You must have provided at least half of the child ’ south documentation during the last year, and the child must have lived with you for at least half the class ( there are some exceptions to this rule ; the IRS has the details here ) .
  • The child can not file a joint tax return .
  • You must have lived in the U.S. for more than half the class ( or, if filing jointly, one spouse must have had a main family in the U.S. for more than half the year ) .

How much you can get per child

For the 2021 tax year, the child tax credit offers :

  • Up to $ 3,000 per qualifying dependent child 17 or younger on Dec. 31, 2021 .
  • Up to $ 3,600 per qualifying dependent child under 6 on Dec. 31, 2021 .

If you took advantage of the advance payments, the IRS most likely sent one-half of the credit in the form of monthly payments from July through December of 2021. Those with qualifying dependents 17 or younger might have received up to $ 250 monthly per qualifying dependent and those with children 5 or younger might have received up to $ 300 monthly per qualifying dependent.

How the child tax credit will affect your taxes

For the 2021 tax year, the CTC is fully refundable — that is, it can reduce your tax placard on a dollar-for-dollar basis, and you might be able to get a tax refund check mark for anything left over. How much of the credit you claim on your 2021 come back will depend on whether you opted in for progress payments, how much you received as an advance, arsenic well as your tax-filing circumstances.

If you received advance payments

letter 6419 contains a detail drumhead of the money you received from the improvement CTC payments. It besides confirms the number of qualifying dependents the IRS used to calculate those advance payments. This information will help you to reconcile the credit when you file your return.

If you opted out of advance payments

If you opted out of the boost payments before the first one was disbursed in July, claiming the recognition on your return will probable be much simple. When you file, you ‘ll simply confirm that you ‘re eligible for the credit and then claim the wide amount you ‘re entitled to based on your 2021 income and issue of qualifying dependents.

If you don’t normally file taxes

Low-income families who may not normally file a tax return had the choice to sign up for advance payments using the IRS ‘s non-filers sign-up tool. To claim the balance ( or the broad credit if you did n’t receive the boost payments ), you ‘ll need to file a render this class.

Will you have to pay back the child tax credit?

First, some well news. The child tax credit is not considered taxable income. It ‘s a credit, which means it can lower your tax beak or potentially result in a refund. however, things get a little catchy if it turns out that you were overpaid on your advance requital. The improvement payments were a prepayment of the 2021 tax accredit you would normally claim in wide during filing season. But because one-half of the accredit was sent out early, the IRS likely used your most recent tax return ( 2020 or older ) to determine how much of an progress to send you each month. so, if your fiscal or personal circumstances ( such as your filing status, income, hands arrangements or residency condition ) have changed in 2021, there ‘s a chance you might have received more of an advance than you ‘re actually eligible for. A few ways this could play out :

  • Let ‘s say you received advance payments totaling $ 1,500 for your qualifying pendent based on your 2020 income. however, your income has increased importantly in 2021, making you eligible alone for a reduced credit. The overindulgence paid out to you is considered an overpayment .
  • Another case : You ‘re a single file clerk with one dependent who lived in the U.S. in 2020. The IRS then sent you improvement payments based on that information, which you accepted. however, in 2021, you actually lived outside of the U.S. for more than half the year, making you ineligible for the child tax citation. Accepting the payment would besides be considered an overpayment .

If it turns out that you were given more of an progress than you were eligible for, you ’ ll need to report it as extra income tax to the IRS on your 2021 refund. That extra income tax will either reduce your refund or potentially increase your tax poster. Some people who were overpaid may besides be eligible for repayment protection, meaning they wo n’t need to repay the IRS. You can learn more about who qualifies on the IRS web site. If you ‘re uncertain how to reconcile your accredit or believe you may have been overpaid, choice tax software or working with a professional tax preparer can help you to reconcile your credit before the tax-filing deadline. frequently asked questions I had a pamper in 2021. Am I eligible for the CTC ? Yes. Parents of newborns in 2021 are eligible for the child tax credit. You can claim the credit when you file your 2021 return . The child tax credit update portal vein shows that a requital was issued, but I did n’t receive it. What steps do I take ? If the child tax credit update portal and your IRS on-line account show that you were issued a payment that you did not actually receive, you can call the IRS to report the miss requital and request a trace at 800-908-4184 ( 7 am to 7 pm local clock time ). The means urges you to have the following information on hand when you call : the requital date, payment method, condition, and the come listed in the CTC update portal vein. If the IRS determines that the payment was not received by you or returned to the representation, the IRS will update its records, and those who are eligible can claim the missing come on their 2021 render . Are the advance child tax credit payments permanent wave ? No. legislation to extend the enhanced credit amount and progress payment structure has not been passed. For now, the child tax credit for the 2022 tax class will revert back to its master soap of $ 2,000 per qualifying dependent . Is the child tax credit taxable ? No, the child tax credit is not considered income and therefore is not taxable. however, if the IRS overpay you ( i.e., the come you received is more than you can claim ), you may need to reconcile the overpayment on your 2021 tax render. I had a baby in 2021. Am I eligible for the CTC ? Yes. Parents of newborns in 2021 are eligible for the child tax accredit. You can claim the credit when you file your 2021 return. The child tax credit update portal vein shows that a requital was issued, but I did n’t receive it. What steps do I take ? If the child tax credit rating update portal and your IRS on-line explanation show that you were issued a requital that you did not actually receive, you can call the IRS to report the miss payment and request a trace at 800-908-4184 ( 7 am to 7 pm local fourth dimension ). The means urges you to have the follow information on hand when you call : the requital date, payment method, condition, and the sum listed in the CTC update portal site. If the IRS determines that the payment was not received by you or returned to the agency, the IRS will update its records, and those who are eligible can claim the missing amount on their 2021 render.

Are the advance child tax credit payments permanent wave ? No. legislation to extend the enhanced credit sum and advance payment structure has not been passed. For immediately, the child tax credit for the 2022 tax class will revert back to its original soap of $ 2,000 per qualifying dependant. Is the child tax citation taxable ? No, the child tax accredit is not considered income and consequently is not taxable. however, if the IRS overpay you ( i.e., the amount you received is more than you can claim ), you may need to reconcile the overpayment on your 2021 tax return.

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