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.
What is new about the CTC in 2021?
The 2021 American Rescue Plan includes 6 key changes to the CTC:
- 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.
- Makes the credit fully refundable. Even if you don’t owe taxes, you could get the full CTC refund.
- Removes the minimum income requirement. You can have zero income and still claim the CTC.
- Raises the qualifying age. Children age 17 and under can qualify for the credit.
- 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 periodic payments for half your new credit between July and December 2021.
- 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).
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).
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 the different tax credits for the same child. 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.
How do I get the newly expanded CTC?
You will have to file a 2020 tax return claiming the current CTC to receive advance payments of the new credit this year. Even though the expanded CTC is for your 2021 tax return (which you file in 2022), the IRS will use your 2020 tax return to determine your eligibility for the advance payments.
The advance payments will give you up to half of your CTC amount in 2021. Then, you will have to claim the rest of it by filing a tax return in 2022.
If you are a first-time filer, you will need a Taxpayer Identification Number. This can be an SSN or ITIN.
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 periodic 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.
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 between July 2021 and December 2021.
The IRS is working to launch an online portal for CTC recipients, where, if necessary, you can update your address information and manage your payments. You can choose to opt-out of advance payments and receive the full amount all at once when you file your 2021 tax return (which you file in 2022). You can also update the number of dependents you have, your income, or your marital status.
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.
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.
What if I don’t file taxes? How can I get the CTC?
You will need to file a 2020 tax return to be eligible for the new CTC advance payments, even if you aren’t normally required to file taxes. You will also need to file a 2021 tax return (which you file in 2022) to get the remaining amount of the CTC you are owed or the full credit if you did not qualify for the advance payments based on your 2020 return information.
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:
- Contact your local Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites for free tax help from an IRS-certified volunteer. Or call your local 211.
- Visit Code for America’s Get Your Refund website to connect with an IRS-certified volunteer that can help you file your taxes online for free.
- Find your local Low Income Taxpayer Clinics (LITCs) for free legal help on tax issues with the IRS.