What You Need to Know Before You Claim the Child Tax Credit This Filing Season
The Child Tax Credit, a benefit designed to help taxpayers support their families, was significantly expanded in tax year 2021 by the American Plan of Rescue Act. The loan has grown from a maximum of $2,000 per dependent to $3,600 in 2021. And for the first time, many taxpayers received half of the credit in advance monthly payments from July to December last year. The other side of all this plus? How this might affect your taxes when you file this year.
Monthly child tax credit payments have ended, meaning parents must now claim the other half of the credit through a tax return. Unfortunately, this process is expected to confuse many who need it most and may not have received these monthly mailings. While monthly advance payments have been sent to many taxpayers who have qualified based on their previous tax returns, the historic expansion of the child tax credit means that people who earn very little or nothing and therefore typically do not file their taxes are still eligible for a loan if they know how to get it. Here’s a quick look at how the child tax credit works this year, according to the IRS Child Tax Credit Newsletter ahead of tax filing season. It’s worth reading before you apply: the IRS has not yet extended the filing deadline beyond April 18, 2022, and the Treasury Department expects “disappointment season” for applicants .
What has changed in the tax deduction for children this year?
In the past, low-income families often did not receive the same amount (or even none) of the child tax credit. According to the White House :
The American Rescue Plan increased the child tax credit from $2,000 per child to $3,000 per child for children over six and from $2,000 to $3,600 for children under six, and raised the voting age from 16 to 17. All working families will receive full credit if they earn up to $150,000 for a couple or $112,500 for a single parent (also called head of household) family.
Here are the most important takeaways from the 2021 Child Tax Credit changes:
- More rights for more people , including those who earn $0 and don’t usually file taxes.
- A larger loan amount is available , now up to $3,000 or $3,600 per child, depending on the age of the child.
- Designed to be received in installments, initially in six-month increments, and the remainder with families’ tax returns in 2022.
Whether you received the initial monthly payments or not, families with children will need to claim the remaining amount owed to them on their 2021 tax return. The 19th News illustrates this this way: if you received all six monthly payments, you can still claim $1,800 if you have one small child, or $3,300 if you have one small child and one older child.
Who is eligible for the child tax credit?
Nearly every child under the age of 18 is eligible for the child tax credit through January 1, 2022. Some income caps apply: for example, only couples earning less than $150,000 and single parents earning less than $112,500 may qualify for the full 2021 amount.
A person claiming a child tax credit must be a qualified taxpayer and the dependent child must be eligible under tax law. Parents or guardians may claim a child if:
- The child lived with them for at least six months during 2021 (although there are some exceptions, including for children with divorced or separated parents).
- They have lived six months or more in the US.
- The child is a US citizen, US citizen, or US resident alien.
Stepchildren, stepchildren, half-siblings and descendants, including grandchildren and nieces or nephews, may also qualify if the tax applicant is their primary caretaker.
In addition, the taxpayer must have a Social Security Number or Individual Taxpayer Identification Number , and the dependent must have a Social Security Number prior to the filing date of the taxpayer’s tax return.
Make sure you check all the boxes as a qualified taxpayer. Fraudulent claims for child tax credits disqualify you for 10 years. Even an improper claim due to “reckless or willful disregard for rules and regulations” (but not fraud) will mean you will be denied credit for two years.
How is the loan amount determined?
Money is provided on a sliding scale, with families that earn more money receiving smaller portions of the loan. Credit starts to decrease for individuals who make $75,000 a year, single parents or heads of households who make $112,500 a year, and couples who make $150,000 a year or more. Those who earn above these thresholds will see the allowance begin to gradually decrease until it reaches $2,000 per child.
How many loans can you get per child?
For the 2021 tax year, the child tax credit offers:
- Up to $3,000 for each dependent child aged 17 and under as of December 31, 2021.
- Up to $3,600 for each dependent child under age 6 as of December 31, 2021.
According to Nerd Wallet , if you’ve taken advantage of advance payments, the IRS has likely already sent you half of the loan. If this is you, you should already be getting up to $250 a month for each dependent under age 17 and $300 a month for a child under 6.
How to get a child tax credit for your taxes this year
The monthly payments were only the first half of the total child tax credit your family is entitled to. The other half of the credit will be included in your 2021 taxes, increasing your refund or reducing your tax arrears. All eligible families will have to claim the amount due to them (which can be even more than 50 percent if you haven’t received all of your initial monthly payments).
Keep an eye on your mailbox for Letter 6419 , which the IRS must send to your family by the end of January. This letter includes two key pieces of information:
- Box 1: Total amount of Advance Child Tax Credits for 2021 (which must be included on your tax return in order for you to receive the rest of the credit).
- Box 2. Number of Eligible Children for Advance Payments and Redemption Protection Calculation on 2021 Federal Tax Return Filings
The IRS also notes that taxpayers who have received advance payments can check the amounts using the CTC Update Portal and online account at IRS.gov. Eligible families who have not received child tax credit advance payments may claim the full amount of the child tax credit on their 2021 federal income tax return. This includes families who do not normally need to file a tax return (more on this below).
Upon receipt of Letter 6419: You enter the total amount of advance child tax credits for 2021 onSchedule 8812 (tax form for claiming tax credits for eligible children and dependents) on lines 14f or 15e, whichever applies to to you. Joint filers will need to add up the amounts shown in box 1 of letter 6419, which each of them received in their application 8812.
How does the child tax credit affect the rest of your taxes?
The child tax credit is fully refundable for the 2021 tax year. Nerd Wallet explains what this means depending on your tax filing circumstances. For example, if you have waived upfront payments, you will simply confirm that you are eligible for a loan and then request the full amount you are eligible for based on your income in 2021 and the number of qualifying dependents.
What if I don’t file a tax return?
If you don’t earn enough to be liable to file taxes, you can still claim a full credit of up to $3,600 per child by filing a tax return anyway .
What if I’m undocumented?
Families with undocumented members did not receive their first monthly child tax credit payment in 2021, according to The 19th . Most were able to receive this payment later that year, but many families still reported receiving only partial or no payments .
If you are undocumented and have children with social security numbers, you are eligible to receive money on behalf of your children. The child must have a social security number issued before May 17, 2021. A child with a TIN is not eligible for a loan, but an undocumented parent whose dependent has a Social Security number will need one; The IRS explains how to apply for an ITIN here.
For more information
For answers to other questions, such as what to do if you don’t have a bank account or if you don’t share custody of a child, check out this clarification from The 19th and the IRS fact sheet on child tax credits .