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More than 36 million American families may be eligible for the child tax credit, or CTC, this year, according to the IRS. The fully refundable tax credit — normally up to $2,000 per qualifying dependent — was expanded to up to $3,600 in 2021 as part of the American Rescue Plan (the coronavirus relief package that took effect in March).
Recipients of the CTC can also get half of the credit as an advance cash payment for the first time in U.S. history. For many families, this means an extra boost of up to $300 monthly per child from July through December for much-needed help with expenses. The first five advance payments have been disbursed, and the last installment of the year is scheduled for Dec. 15.
The enhanced child tax credit has been a lifeline for many families, but questions have also accompanied its rollout: Do I qualify? Should I take the advance payments or opt out? How will the advance payments affect my taxes?
Here’s what you should know about the 2021 child tax credit.
How to qualify for the child tax credit
You can take full advantage of the credit only if your modified adjusted gross income is:
Single: under $75,000.
Head of household: $112,500.
Married filing jointly: $150,000.
The credit begins to phase out above those thresholds.
First phaseout: Income exceeds the above thresholds but is below $400,000 (married filing jointly) or $200,000 (all other filing statuses). Your total credit per child can be reduced by $50 for each $1,000 (or a fraction thereof). This phaseout will not reduce your credit below $2,000 per child.
Second phaseout: Income exceeds $400,000 (married filing jointly) or $200,000 (other filing 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 credit altogether.
Low-income families who may not normally file a tax return can use the IRS's non-filers sign-up tool to register for the monthly advance child tax credit payments.
Some of the other child-related eligibility requirements for the child tax credit include:
You must have provided at least half of the child’s support during the last year, and the child must have lived with you for at least half the year (there are some exceptions to this rule; the IRS has the details here).
The child cannot file a joint tax return.
How much you can get per child
The IRS will use your most recent tax return to determine how old your dependents are and how much of an advance to send you each month. Remember, the advance is only equal to half of the total credit and is coming in six monthly payments that started in July and will go through December. You can claim the balance of the credit on your 2021 tax return.
In 2021, the child tax credit offers:
Up to $3,000 ($250 monthly) per qualifying dependent child 17 or younger on Dec. 31, 2021.
Up to $3,600 ($300 monthly) per qualifying dependent child under 6 on Dec. 31, 2021.
Estimate your child tax credit amount
How and when the advance payments will arrive
The IRS automatically enrolled families it considered qualified for the CTC into the advance payment program. The installments are distributed via direct deposit or mailed as a paper check (depending on what information the IRS has on file for you — usually your latest return).
The remaining 2021 advance payments will be made on the 15th of each month, unless the 15th falls on a weekend or holiday. The next — and last — payment is currently scheduled for Dec. 15.
Monthly Payment Schedule
You can verify your bank information and preferred payment method via the IRS child tax credit update portal.
How to track a missing payment
If you’re trying to track down a missing payment, double-check your address and bank information via the IRS portal first. Once you verify that it’s correct, consider that your bank might be processing the payment or the check could be in transit.
If all of your info is correct and you still haven’t received your money, you can ask the IRS to issue a trace by filling out Form 3911 — but make sure you fall within the approved window for requesting a trace before you fax or mail the form:
Time Elapsed Since Payment Date
Check sent to standard address via mail
Check sent to forwarded address via mail
Check sent to foreign address via mail
How the child tax credit will affect your taxes
The child tax credit can reduce your tax bill on a dollar-for-dollar basis. It is also refundable — that is, it can reduce your tax bill to zero, and you might be able to get a tax refund check for anything left over.
However, if it turns out the IRS overpaid your child tax credit, you may need to true that up on your 2021 return. This could happen if your financial or personal circumstances have changed since your most recent return, including your filing status, income, custody arrangements or residency status.
For the 2021 child tax credit, you can either claim 100% on your taxes when you do your 2021 taxes (that's the tax return due in April 2022) by opting out of advance payments (more on that below), or you can accept 50% of that money as an advance payment and claim the other 50% on your taxes later.
Example: If you qualify for a $3,000 child tax credit, you could get six $250 payments between July and December (for a total of $1,500) and then claim the remaining $1,500 on your tax return. Alternatively, you could opt out of the advance monthly payment plan and then claim the full $3,000 credit when you file your return.
How to opt out from advance monthly payments
The IRS allows you to unenroll from the advance monthly payments. Are there any advantages to doing so? It depends on your situation. Here are a few reasons to consider.
You’d prefer to receive the credit as a lump sum when you file your return instead of receiving half as advance installments.
You suspect that the amount you’ll owe to the IRS is greater than your anticipated refund.
Your tax circumstances have significantly changed since your last filing (e.g., increased income, your child aged out of the qualifying bracket, custody changes), and you’re worried these changes might cause the IRS to overpay you.
If you need to unenroll, you can do so via the IRS portal. The deadline to unenroll for the December payment is Nov. 29.
Deadline to Unenroll
2020 child tax credit facts and figures
If you haven't yet filed your return for the 2020 tax year, you may be interested in these figures and stipulations.
The credit amount is up to $2,000 per qualifying dependent child 16 or younger at the end of the calendar year. There is a $500 nonrefundable credit for qualifying dependents other than children.
You can take full advantage of the credit only if your modified adjusted gross income is under $400,000 for married filing jointly, and $200,000 for everybody else.
Up to $1,400 of the credit is refundable; that is, it can reduce your tax bill to zero and you might be able to get a refund on anything left over.
For the 2020 tax year, there are special rules due to coronavirus: You can use either your 2019 income or your 2020 income to calculate your tax credit, and you can use whichever number gets you the bigger tax credit. (This is also the case for the Earned Income Tax Credit.) Be sure to ask your tax preparer to run the numbers both ways.
To take the child tax credit for the 2020 tax year, the child has to be 16 or younger on Dec. 31, 2020.