2021 Child Tax Credit
The child tax credit has been expanded for tax year 2021. It now applies to qualifying children who are under age 18 as of December 31, 2021. Previously, the child had to be under age 17. The amount of the credit has also increased. The maximum amount is now up to $3,600 for children under age 6 as of December 31, 2021 or $3,000 for children ages 6 through 17. Previously, the child tax credit was a maximum of $2,000.
Advance Child Tax Credit Payments
From July 2021 through December 2021, the IRS issued Advance Child Tax Credits up to $300 for children under age 6 and up to $250 for children ages 6 through 17. These advance payments will need be reconciled on your 2021 federal income tax return. If you received EXCESS payments, you may have to repay some or all of the payments (See Repayment Protection Below). The IRS will mail all taxpayers who received advance child tax payments Letter 6419 in January 2022 showing the amounts received which will assist in the accurate preparation of their income tax return. You can also Login to Your IRS Online Tax Account to view the amounts received.
Who is Eligible for the Increased Child Tax Credit?
The increased child tax credit which can be as much as $1,600 ($3,600 minus the $2,000 regular child tax credit) for qualifying children under age 6 and as much as $1,000 ($3,000 minus the $2,000 regular child tax credit) for qualifying children under age 18. The increased amount does gradually phase-out at a rate of 5% as modified adjusted gross income (MAGI) exceeds the specified thresholds shown below:
For Children Under Age 6 on December 31, 2021
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$75,000 if Single or Married Filing Separately
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$112,500 if Head of Household
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$150,000 if Married Filing Jointly or Qualifying Widow(er)
For Children Age 6 through 17
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$75,000 if Single or Married Filing Separately
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$112,500 if Head of Household
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$150,000 if Married Filing Jointly or Qualifying Widow(er)
Once the increased credit amount is phased-out, the $2,000 child tax credit still applies. However, the $2,000 child tax credit does start to phase-out when modified adjusted gross income (MAGI) reaches $200,000 ($400,000 if married filing jointly).
Additional Child Tax Credit
The child tax credit is generally a nonrefundable credit. Therefore, any excess of the credit over the taxpayer’s income tax liability is lost. However, a special provision provides that a portion of the child tax credit can be refundable. This is known as the "Additional Child Tax Credit". For tax year 2021, it is fully refundable as long as your main home is in the United States for more than half of year 2021 or the taxpayer is a bona fide resident of Puerto Rico for the tax year. The taxpayer must also not be claiming the foreign earned income exclusion or foreign housing exclusion.
Repayment Protection
If a taxpayer qualifies for repayment protection, the amount of their tax liability from excess advance child tax credit payments is reduced by up to the full repayment protection amount. The full repayment protection amount equals $2,000, multiplied by the following:
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The number of qualifying children that the IRS took into account in determining the IRS’s initial estimate of your advance child tax credit payments, minus
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The number of qualifying children properly taken into account in determining the allowed child tax credit amount on the taxpayer’s 2021 tax return
The repayment protection amount will decrease based on how much the taxpayer’s MAGI is greater than the following amounts based on the filing status on their 2021 tax return:
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$40,000 for Single or Married Filing Separately
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$50,000 for Head of Household
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$60,000 for Married Filing Jointly
There is NO repayment protection once MAGI reaches:
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$80,000 for Single or Married Filing Separately
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$100,000 for Head of Household
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$120,000 for Married Filing Jointly
