Here is a short update on what changed with the child tax credit & advance child tax credit.
- One year expansion for 2021 tax year only, per the American Rescue Plan Act of 2021)
- For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:
- $3,600 for children ages 5 and under at the end of 2021; and
- $3,000 for children ages 6 through 17 at the end of 2021
Note: The $500 nonrefundable credit for other dependents amount has not changed.
- The advance: 50% of it will be paid in advance with monthly payments. But those montly payments will only rund form July to Decemebr 2021. (The payments will be made on July 15, August 13, Spetember 15, October 15, November, 15 and December 15.) The remaining 50% will be calimed as a credit on your 2021 tax return.
- Filers can OPT-OUT of the advance by going online and selecting to receive the full CTC on their 2021 tax return instead.
- IF filers are paid too much (i.e., more than the child tax credit they’re entitled to claim for 2021), they might have to pay back some of the money.
- Filers with 2021 modified AGI no greater than $40,000 (single filers), $50,000 (head-ofhousehold filers), or$60,000 (joint filers) won’t have to repay any child tax credit overpayments.
- Filers with a modified AGI from $40,000 to $80,000 (single filers), $50,000 to $100,000 (head-of-household filers), or $60,000 to $120,000 (joint filers) will need to repay a portion of any overpayment.
- Filers with modified AGIs above those amounts will have to pay back the entire overpayment.
- The $2,500-of-earned-income required is dropped for 2021, too. Children who are 17 years old also qualify for the 2021 credit.
Phaseout-
- The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:
- $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
- $112,500 if filing as head of household; or
- $75,000 if you are a single filer or are married and filing a separate return.
- The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
- The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:
- $400,000 if married and filing a joint return; or
- $200,000 for all other filing statuses.
The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
If you prefer, here is the link to FAQ – CLICK HERE
