What’s New about the Child Tax Credit in 2021?

This page will be regularly updated as new information becomes available.

Last updated 06/21/2021

1. What is the Child Tax Credit (CTC)?

The Child Tax Credit helps offset the costs of raising kids.

The CTC has two components. First, the credit reduces income taxes you owe. If your credit is more than the taxes you owe, you get the extra money back in your tax refund.

2. What is new about the CTC in 2021?

The 2021 American Rescue Plan includes 6 key changes to the CTC:

  1. Increases the tax credit amount. The tax credit’s maximum amount is $3,000 per child and $3,600 for children under the age of 6.
  2. Makes the credit fully refundable. Even if you don’t owe taxes, you could get the full CTC refund.
  3. Removes the minimum income requirement. You can have zero income and still claim the CTC.
  4. Raises the qualifying age. Children age 17 and under can qualify for the credit.
  5. Provides advance payments. If you already qualify for the current CTC when you filed your 2020 tax return (which you file in 2021), you can start receiving part of the expanded credit during 2021. You don’t have to wait until you file your 2021 tax return (which you file in 2022). The IRS will send you monthly payments for half your new credit between July and December 2021.
  6. Lowers the phase out rate. The CTC amount will start to gradually decrease starting at $75,000 ($150,000 for married couples and $112,500 for heads of households).

View this chart below to compare the new changes to the CTC.

$2,000 CTC (current) Expanded CTC (new)
Age of child Children age 16 and under can qualify for the credit Children age 17 and under can qualify for the credit
Credit Amount $2,000 per child $3,000 per child and $3,600 for children under the age of 6
Refund Amount Up to $1,400 per child is refundable Fully refundable
Income You must have earned income more than $2,500 to qualify for the refundable part of the credit No income requirement, you can have zero income and still qualify for the full credit amount per child
Advance Payments No advance payments Periodic advance payments between July to December 2021
Phase Out Rate The CTC amount will start to decrease at $200,000 for single filers and heads of households ($400,000 for married couples) The CTC amount will start to decrease at $75,000 for single filers ($150,000 for married couples and $112,500 for heads of households)

This is a temporary one-year expansion of the CTC for your 2021 tax return (which you file in 2022).

3. Am I eligible for the newly expanded CTC?

There are three main criteria to claim the expanded CTC:

1. Income: There is no minimum income requirement to claim the new CTC. However, the CTC will start to decrease when you make $75,000 ($150,000 for married couples and $112,500 for heads of households). Each $1,000 of income above the phase-out level reduces your CTC amount by $50.

2. Taxpayer Identification Number: You and your spouse need to have an SSN or an Individual Taxpayer Identification Number (ITIN).

3. Qualifying Child: Children claimed for the CTC must be “qualifying children.”

To claim children for the CTC, they must pass the following “qualifying child” tests:

Relationship: The child must be your child, grandchild, stepchild or adopted child; younger sibling, step-sibling, half-sibling, or their descendent; or a foster child placed with you by a government agency.

Age: The child must be 17 or under on December 31, 2021.

Residency: The child must live with you in the U.S. for more than half the year. Time living together doesn’t have to be consecutive. There is an exception for non-custodial parents who are permitted by the custodial parent to claim the child as a dependent (a waiver form signed by the custodial parent is required).

Taxpayer Identification Number: Children claimed for the CTC must have a valid social security number (SSN).

Support: The child does not provide more than half of their own support in 2021.

Dependency: The child must be considered a dependent for tax filing purposes.

Note: If you are separated or divorced, you and your (former) spouse can’t split different tax credits for the same child. For example, if you claim a dependent for the CTC, you will also have to claim that dependent for the Earned Income Tax Credit, if you are eligible.

4. How much will my newly expanded CTC amount decrease by if I have a higher income?

The expanded CTC will be reduced in two steps:

  1. The CTC will be reduced to $2,000 per child: It will reduce by $50 for each $1,000 that you are above the income threshold ($75,000 for single filers, $150,000 for married couples, and $112,500 for heads of households) until the CTC reaches $2,000.
  2. The CTC will be reduced again to below $2,000 per child. It will reduce by $50 for each $1,000 that you are above the income threshold ($200,000 for single filers and heads of households and $400,000 for married couples) until the CTC reaches $0.

5. How do I get the newly expanded CTC and get advance payments?

You don’t need to do anything to get the advance payments if you:

  • Filed a tax return for tax year 2019 or 2020. *Your tax return will be used to determine eligibility for advance payments even if you didn’t claim the CTC on your tax return.
  • Successfully submitted your information using the 2020 IRS Non-Filers tool (the one used to get your stimulus payments).

The IRS started sending notices about  eligibility for the advance CTC payments in  June. The IRS will automatically send your monthly advance payments for each qualifying child from July 15, 2021 to December 15, 2021.

If you don’t fall into the above categories, you have two options to get the advance payments:

  • You aren’t normally required to file taxes, you can use a new IRS Non-Filer portal to submit a simplified tax return. You’ll be able to enter your information, including the number and ages of your qualifying children to receive advance payments of the new credit this year.

See the table below to check if you’re required to file a 2020 tax return:

Filing Status Gross Income (Taxpayers under 65) Gross Income (Taxpayers over 65)
Single $12,400 $14,050
Head of Household $18,650 $20,300
Married Filing Jointly $24,800 (both spouses) $26,100 (one spouse)
$27,400 (both spouses)
Married Filing Separately $5 $5
Qualifying Widow with Dependent Child $24,800 $26,100
  • If you’re required to file taxes, you have to file a 2020 tax return to receive advance payments of the new credit this year.

If you earned any income, we recommend filing taxes whether or not you have a filing requirement, as you may be eligible for other valuable tax credits, such as the Earned Income Tax Credit, which can give you more money back on your tax refund.

The expanded CTC is for your 2021 tax return (which you file in 2022). The advance payments will give you half of your CTC amount in 2021. You will have to file a tax return in 2022 to get the rest.

If you are a first-time filer, you will need a Taxpayer Identification Number. This can be an SSN or ITIN.

Click here to learn more about how to get an ITIN.

6. How much money will I get from the newly expanded CTC?

 If you already claim a CTC refund, you’ll receive part of the larger 2021 credit in advance this year.

Example: Catlin has a 12-year-old daughter and 3-year-old son and earned $12,000 in 2020. When he filed his 2020 tax return (which you file in 2021), he claimed the current CTC and received a total of $1,425 in 2021. Because of the new rule changes to the CTC, when he files his 2021 tax return (which you file in 2022), his expanded CTC will be worth $6,600. Through the advance payments, he will start receiving half of his new credit in 2021 ($3,300) in monthly payments from the IRS between July and December 2021. He will claim the remaining amount when he files his tax return in 2022.

You can use Kiplinger’s 2021 Child Tax Credit Calculator to calculate how much money you will receive from the CTC.

7. When will I get the payments?

You will receive half of your CTC in 2021 and the rest of it in 2022 when you file your tax return. The amounts that you receive in 2021 are known as advance payments, which will be paid to you monthly from July 15, 2021 to December 15, 2021.

Each month, you will receive at least $300 for each child aged 5 and under and at least $250 for each child aged 6 to 17.

For example, if you have a 12-year-old daughter and a 3-year-old son, you are eligible for a $6,600 CTC. Starting on July 15 until December 15, 2021, you will receive $250 per month for your daughter and $300 per month for your son, for a total of $3,300. You will have to claim the rest of the money in 2022 when you file your tax return.

8. How will the advance payments be sent?

If the IRS already has your banking information because you had a tax refund directly deposited, your advance payments will be sent as a direct deposit. The IRS will use the sources listed below (in order) to know which bank account to deposit your payments in:

  1. Your 2020 tax return
  2. Your 2019 tax return or the information you submitted to the IRS 2020 Non-Filer tool to get your stimulus checks
  3. Information you submitted to Get My Payment in 2020
  4. A federal agency that sends you benefits (eg: Social Security Administration, Department of Veterans Affairs, or the Railroad Retirement Board)

If the IRS does not have any of your banking information, your advance payments will be sent by mail.

9. What is the Child Tax Credit Update Portal (CTC UP) used for?

The IRS launched an online portal for CTC recipients, called the Child Tax Credit Update Portal (CTC UP). You can use the portal to opt out of advance payments if you prefer to receive the full amount of your refund all at once when you file your 2021 tax return (which you file in 2022).

Later in the year, the CTC portal will allow you to make other updates, including changing your bank account information and your mailing address. In addition, if your family situation has changed since you last filed tax return or changes during the year, you can make updates to the number of dependents you have, your income, or your marital status. For example, if you have or will have a new baby this year, you can update your number of qualifying children on the CTC portal. These life changes can affect the amount of CTC you are eligible for. Making updates will help make sure that the IRS is sending you the correct amount of your CTC.

10. What if I receive more money than I should have as part of the advance payments for the expanded CTC?

Congress enacted a safe harbor protection for families with lower incomes if the IRS overpays you. If your 2021 income is less than $40,000 ($60,000 for married couples and $50,000 for heads of households), you are not required to repay anything back.

This protection only applies if you are overpaid because there are changes to the number of children you claim, not changes in income. The safe harbor amount gradually decreases as your income increases. If your 2021 income is $80,000 or above ($120,000 for married couples and $100,000 for heads of households), you are required to repay the full excess amount.

If you earn more than the safe harbor allows and receive more money than you should through advance payments in 2021, the IRS may require you to pay back the excess amount when you file your 2021 tax return (which you file in 2022). This means that you will either owe more taxes or see a decrease in your tax refund.

An example is if you received advanced payments for a child who lived with you in 2020, but moved in March 2021. Once you file taxes in 2022 (for Tax Year 2021), you will have to pay the money back.

The CTC Update Portal will provide the opportunity to not receive advance payments if you’re  unsure if you will be eligible for the expanded CTC (e.g., you anticipate that your income will change or the dependents you can claim will change). The portal will also allow you to update your information (the number of dependents you have, your income, or your marital status) which will help the IRS to pay you the correct amount.

11. What if I didn’t file a 2019 or 2020 tax return and I didn’t use the 2020 IRS Non-Filer tool? How can I claim the newly expanded CTC and get advance payments?

If you aren’t normally required to file taxes, use the new IRS Non-Filer portal. This tool allows you to register for advance CTC payments and claim any missed stimulus checks. You will be asked to provide your information, including the number and ages of your qualifying children.

12. What if my advance payments are based on my 2019 tax return and then, I recently filed my 2020 tax return? Will the IRS update the amounts of my advance payments?

Yes. As soon as the IRS processes your 2020 tax return, the amount of your advance payments will be adjusted if there are changes to your income, number of qualifying children, or filing status.

13. What if I filed a 2020 tax return, but the IRS still hasn’t processed my 2020 tax return?

The IRS will use your 2019 tax return to determine if you’re eligible for advance payments and if you are, the amount you will get. Once your 2020 tax return is processed, your payment amount may change.

14. Can my advance payments be reduced if I owe child support payments, back taxes, Federal or state debt, or money to creditors or debt collectors?

No. Your advance payments won’t be offset to pay past-due child support, back taxes, and Federal or state debts. However, they are not protected from garnishment by creditors and debt collectors.

***

When you file your tax return and receive the rest of your CTC as part of your tax refund, it can be reduced for past-due child support payments, back taxes, Federal or state debts, and garnishment by creditors and debt collectors.

15. What if I get government benefits? Will these payments count against eligibility?

Tax credit refunds including the CTC don’t count as income against federally funded benefit programs like SNAP, TANF, or Medicaid. Tax credit refunds that are saved are not counted toward asset limits in such programs for 12 months.

16. Do advance payments count as income? Do I need to report it on my tax return?

No. Advance payments are not income and do not need to be reported as income on your tax return. These payments are early payments of your 2021 Child Tax Credit, which you would normally claim as part of your tax refund when you file your tax return. Even though the advance payments don’t need to be reported on return, in January 2022, the IRS will send you Letter 6419 that tells you the total amount of advance payments sent to you in 2021. Please keep this letter for your tax records. On your 2021 tax return (which you file in 2022), you may need to refer to this notice to claim your remaining CTC.

17. What if I share custody of my child? Who will get to claim the newly expanded CTC and advance payments?

Only one person — whoever lives with the child for more than half the year — can claim the expanded CTC. If you claimed your child on your 2020 tax return (or 2019 return if you haven’t filed your 2020 tax return), starting in July 2021 you’ll automatically begin receiving half of the newly expanded CTC through advance payments. You will receive the rest of the CTC when you file a 2021 tax return in 2022.

If your child lived with you for most of the year, but no longer does, make sure to file a 2020 tax return so the IRS has your most recent information. Or, if your situation changes in 2021, update the information in the CTC update portal.

If more than one parent or guardian lived with your child for more than half of the year, the parent who claimed the child on the most recent tax return will be the parent who receives the advance payments. The same situation applies if you and other relatives both care for and live with the child.

That parent or relative who receives the advance payments should be the same person to claim the CTC on their 2021 tax return (which you file in 2022), to receive the remaining half of the credit (as long as that parent or relative still lives with the child for most of 2021). If the other parent claims the CTC instead, the IRS will question whether the advance payments made in 2021 were made improperly. The IRS may need to take additional steps to determine who can rightfully claim the child, which may lead to a delay of your tax refund.

Custody Changes:

You can update your custody arrangement, if it has changed since your 2019 return, by filing a 2020 tax return (which you file in 2021) if you haven’t already filed. This will allow you to receive the current CTC and possibly receive the advance payments of the newly expanded CTC.

18. Is there a deadline to sign up for advance CTC payments?

After the IRS processes the information you provide through the IRS Non-filer portal or by filing a 2020 tax return, you will begin receiving advance payments. If you sign up after payments are first issued in July, your monthly payments will be larger so that you still get half of your CTC amount in 2021.

If you don’t receive some or all of your advance payments, you can still file your 2021 tax return (which you file in 2022) to receive the full amount of the newly expanded CTC.

19. Are these new changes to the CTC permanent?

Maybe. The new rule changes to the CTC are temporary. They only apply to your 2021 tax return (which you file in 2022).  Legislation is being proposed to have the changes be in effect for subsequent years.

Need help with filing your taxes?

If it’s your first time filing or you need help filing your tax return to claim the CTC, you can:


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