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Child Tax Credit

IRS Child
Tax Credit

There are factors to consider when it comes to a child or children and income taxes:

The 2021 Tax Return Child Tax Credit

On this page, the focus is on the Child Tax Credit, the advance payments of the CTC, and the Additional Child Tax Credit.

Important 2021 Advance Child Tax Credit Update: Due to the American Rescue plan, the IRS has set up an online page for the Advance Child Tax Credit and began disbursing up to $300 per child in monthly payments in July 2021. The Advance Child Tax Credit sends parents monthly direct payments for each child 17 and younger that they claim for tax purposes. If you generally do not file a tax return, you will have to have filed a 2020 tax return so the IRS would have had record of the number of dependents you will claim. Otherwise, you may not have received the advance payments: claim the full amount of your 2021 CTC by preparing and e-filing a 2021 Return.

As a result of the American Rescue Plan Act (ARPA) of 2021, the future of various tax breaks and credits has been changed for 2021. This may lead to future changes that could stay, but, as of now, these changes only apply to to the 2021 Tax Return to be filed in 2022.

The Child Tax Credit works differently in 2021 and has received an increased amount. The credit will allow 17 year-old dependents to qualify and provide up to $3,000 per qualifying child or $3,600 per qualifying child under age 6. The credit will also be fully refundable - it has always been a partially refundable credit - and is being made more accessible for those without taxable income by removing the $2,500 earnings floor. In other words, you do not need to have any earned income to claim the credit.

Similarly to the stimulus payments and the Recovery Rebate Credit, you will be able to claim a portion of the Child Tax Credit as an advance payment. Throughout the year, you may have received payments on a scheduled basis in 2021; you will need to claim the remainder of the credit on your 2021 Tax Return in 2022. The IRS issued these in July and continued through December of 2021. Monthly payments gave qualifying taxpayers $300 for dependents under 6 years old and $250 per month for dependents under 17 via direct deposit or by check through the mail.

A notable change, however, is that the maximum income threshold has changed significantly. For Tax Year 2021, single taxpayers will be eligible for the full credit if their adjusted gross income (AGI) is at or below $75,000 or $150,000 for married filing jointly. Additionally, the limit for the phaseout will be $112,000 for head of household. The amount will phaseout by $50 per $1000 over the threshold. This is only if taxpayers claim the increased credit - the normal, $200,000 single/$400,000 married filing joint threshold still applies if a taxpayer does not qualify for the increased credit and, instead, claims the regular credit with pre-ARPA rules. When you file your 2021 tax return on eFile.com, we will calculate this for you and determine the credit that is most beneficial to you based on your tax information.

You may be eligible to receive a fully refundable Child Tax Credit if your income is within the above mentioned threshold. Additionally, you will likely be able to claim periodic installments of this payment during the tax year. For 2021, you may have received in advance, 50% of the Child Tax Credit during 2021. You will have to claim the remaining 50% on your 2021 Tax Return.

When you prepare your tax return on eFile.com, we will automatically check to see if you qualify for the Child Tax Credit. If you qualify for the credit, the exact amount will be calculated for you. We will select the right form and fill it out in order for you to get your maximum credit amount.

For all other tax years: If you have a qualifying child at the age of 16 or younger as of December 31 of the tax year, you may be able to claim the Child Tax Credit. Part of the Child Tax Credit can be refundable, so it may give you a tax refund even if you don't owe taxes. The qualifying child or children must have a social security number or SSN issued by the Social Security Administration before the tax return or tax extension due date - typically, April 15. See steps to take to obtain a SSN.

Here are some important facts about the Child Tax Credit:

  • The Child Tax Credit is intended to offset the many expenses of raising children.
  • The Child Tax Credit can be worth as much as $3,500 per child for Tax Year 2021. 
  • For Tax Years 2018-2020, the maximum refundable portion of the credit is $1,400 (equal to 15% of earned income above $2,500). If your tax is $0 and your total earned income is at least $2,500, you can claim the refundable part of the credit - see the Additional Child Tax Credit section below. For Tax Year 2022, the refundable portion will be $1,500.
  • For 2021, the Child Tax Credit begins to phase out (decrease in value) at an adjusted gross income of $200,000 for Single or at $400,000 for Married Filing Jointly). This is only if you did not qualify for the enhanced credit.
  • When figuring your income for the purposes of the Child Tax Credit, you must include any foreign income exclusions.
  • Refer to the Child Tax Credit and Credit for Other Dependents Publication 972 for more details. Or, contact one of our Taxperts if you have specific questions.

Use the eFile.com CHILDucator tax educator tool below to help you find out if you are eligible to claim the Child Tax Credit on your 2021 Tax Return:

Find out if your child qualifies you for the Child Tax Credit!

To qualify for the Child Tax Credit, you must have a child or dependent who meets all of the following requirements:

  • Age: The child must have been 16 or younger on December 31 of the tax year (for Tax Years 2018 - 2020).
  • Citizenship: The child must be a United States citizen, a United States national, or a resident alien.
  • Dependent: The child must be claimed as a dependent on your tax return. See the free eFile.com DEPENDucator if you are not sure if someone qualifies as a dependent.
  • Relationship: The child must be related to you in one of the following ways: son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, grandchild, niece, or nephew. This includes any legally adopted child, any child lawfully placed with you in preparation for adoption, and any foster child lawfully placed in your care.
  • Residency: The child must have lived with you for more than half of the year (stayed with you for at least 183 nights). Temporary absences for special circumstances are generally acceptable and special rules may apply if you are divorced or for other certain circumstances.
  • Support: The child must NOT have provided more than half of his or her own financial support for the year.

Rather than worry about how much of the credit you qualify for, let the eFile platform do the work for you. Report your tax figures, income, and some information about your dependent(s) and the app will determine how much of the credit you qualify for. Sign up for an eFile.com account here so you can prepare and e-file your tax return now.

Additional Child Tax Credit

The Additional Child Tax Credit or ACTC is a refundable credit that you may receive if your Child Tax Credit is greater than the total amount of income taxes you owe, as long as you had an earned income of at least $2,500. For 2018  - 2021 Returns, the ACTC is worth up to $1,400. For 2022 Returns, it will be worth up to $1,500.

Important: If you qualify and claim the Additional Child Tax Credit on a tax return, you might get a refund even if you do not owe any tax.

Schedule 8812, Additional Child Tax Credit, is the outputted form that the eFile tax app will generate when you e-File your 2021 Taxes with eFile.com. It is used to determine if you qualify for the credit and to calculate the amount of the credit you will receive. eFile.com will do all required math and generate the form for you when you prepare your return. For 2021 Returns, Schedule 8812 will be used for the nonrefundable Child Tax Credit, Additional CTC, and the Credit for Other Dependents - eFileIT.

For 2021, the Child Tax Credit may be fully refundable if you had zero income. In the past, it has been partially refundable; this means that some of the credit is nonrefundable while some is refundable and the amounts will be reported in two separate sections of your return. A nonrefundable credit means that the credit cannot be used to increase your tax refund or to create a tax refund when you don’t already have one. Refundable tax credits, on the other hand, are treated as dollar-for-dollar payment directly to you. When the total of these credits is greater than the tax you owe, the IRS sends you a tax refund for the difference. See more details on refundable and nonrefundable tax credits.

Only one taxpayer (or married couple filing jointly) may claim any one child for the purposes of the Child Tax Credit and the Additional Child Tax Credit. If a child is claimed as a dependent on more than one tax return, the IRS will determine who gets the claim according to a set of tiebreaker rules. See details on dependent claiming disputes.

Child-Related Tax Savings

Here are other ways you can save taxes on raising children: 

  • Child and Dependent Care Credit: You may be able to deduct up to $3,000 for one dependent, or up to $6,000 for more than one dependent with the Child and Dependent Care Tax CreditImportant: for 2021, these figures have been increased and you may be able to report $8,000 for one dependent or $16,000 for two or more and receive up to 50% of this amount as a credit.
  • Adoption Tax Credit: If you adopted a child, or if you are in the process of adopting a child, you may qualify for the Adoption Tax Credit.
  • Filing Status: If you are unmarried and your child lived with you for more than half of the year, you may qualify for a higher standard deduction and lower tax rates by filing as Head-of-Household.
  • Credits and Deductions: Your child may qualify for different education credits or education deductions when enrolled in a qualifying school program.

See what other tax credits and tax deductions may be available to you.

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