Now reading:Your Free Guide to the Child Tax Credit

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researched the Child Tax Credit and provide this guide only for general information purposes.

Your Free Guide to the Child Tax Credit

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Understanding the Child Tax Credit
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The Child Tax Credit is a tax deduction that taxpayers can use to reduce the income tax that they pay each year.
The way it worked in the past is that parents of children from birth to age 16 were able to deduct $2,000 per
qualifying child from the amount that they owe on their income taxes when they file. 

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In order to qualify, the children had to be dependents listed on the tax return, related to the taxpayer, living with
the filing taxpayer for at least six months a year and be US citizens. If the parents did not owe taxes, a portion
of the Child Tax Credit (up to $1,400) was refundable as long as there was at least $2,500 in income and the
taxpayers earned less than $400,000 if filing jointly or $200,000 if filing singly. 

However, as part of the COVID relief provisions in the American Rescue Plan passed by Congress in March
2021, the government has changed several important things about the Child TaxX Credit to get money to
American families including the amount, the timing and the amount that is refundable. 

You can obtain additional information directly from the IRS at: IRS.gov/credits-deductions/2021-child-tax-credit-
and-advance-child-tax-credit-payments-topic-a-general-information.
What Agency Is in Charge of the Child Tax Credit?

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Since the Child Tax Credit is a deduction on your federal income taxes, everything relating to the Child Tax
Credit is administered by the Internal Revenue Service (IRS), the taxing agency of the federal government. 

The IRS determines your eligibility and the amount you will be getting. They use the data they have on
taxpayers from their previous years’ tax returns to make an initial determination of eligibility for the Child Tax
Credit. 

However, if your family or income circumstances have substantially changed, you do have the opportunity to
inform the IRS so that they can make the appropriate changes. In addition to deciding who is eligible to receive
the Child Tax Credit payments, the IRS is also responsible for distributing the money directly to American
taxpayers. 

The Changes for 2021

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In this section:
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Amount
Different Amounts Based on Age
Expanded Age Range
Refundable Amount
Removal of Minimum Income Requirement
Prepayment

The Child Tax Credit for 2021 is different from previous years in a number of ways. Because these changes are
intended to alleviate financial hardship as a result of the COVID-19 pandemic, they will only be in place for
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2021, after which the Child Tax Credit will go back to the way it was before the American Rescue Plan. Here is
how this year’s Child Tax Credit is different:

Amount
The highest maximum amount is now $3,600 instead of $2,000 per qualifying child. The extra money can help
parents pay bills and replace some of the income they may have lost during job layoffs and closures during the
pandemic.

Different Amounts Based on Age

In previous years, the amount of the Child Tax Credit was the same regardless of the age of the child, as long as
they qualified (birth to age 16). In 2021, young children, from birth to age 6, qualify for more money than older
children.

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The maximum amount of the Child Tax Credit (which is on a sliding scale based on income, see section “How
Much Money Do You Qualify to Receive?” of this guide) for children from birth to age 6 is $3,600 and the
maximum amount for children aged 6-17 is $3,000.

Expanded Age Range

The credit is now available for 17 year-olds, where it was previously only available for children up to age 16. If
your child is otherwise eligible and turns 17 in 2021, you should be able to claim the Child Tax Credit for him or
her. However, if you have a 17-year-old who turns 18 in 2021, you cannot claim the Child Tax Credit for that
child.

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Refundable Amount

For 2021, the entire amount of the Child Tax Credit is now refundable, rather than only a portion, as in the past.
The regular rules specified that certain low-income people whose tax liability was less than the total Child Tax
Credit of $2,000 per qualifying child could only get a refund of $1,400 per child. 
The new rule for 2021 means that people who have overpaid their taxes through payroll deductions or do not
earn enough to need to pay taxes in the first place can still receive the entire benefit of the Child Tax Credit by
getting it via a tax refund from the IRS. 

Removal of Minimum Income Requirement

The new provision in the American Rescue Plan removes the income floor, so now no minimum income is
required to claim the Child Tax Credit. Before, taxpayers were required to earn at least $2,500. However, for
2021, Americans who have earned no or very little money can still get the Child Tax Credit. 

Prepayment

Half of the Child Tax Credit amount will be prepaid in monthly payments before taxes are filed instead of
needing to wait until after tax filing and processing by the IRS. For example, a family with one 4-year-old child is
eligible to receive $3,600. Of this, half which amounts to $1,800, will be paid out by the government in six
monthly installments of $300 each beginning in July 2021 and going through December 2021. The remainder
will either offset taxes owed or will be included in the taxpayer’s tax refund when the tax return is filed and
processed by the IRS after April 15, 2022.

Determining Your Eligibility

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To be eligible, you must have one or more dependent children who: 

Are under age 18 for the entirety of 2021

Have a valid Social Security number 
Live with you at least six months a year
Are US citizens
And you must have earned less than certain income limits (see the section “How Much Money Do You
Qualify to Receive?” below)

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Most of the people who will be receiving the Child Tax Credit in 2021 are taxpayers who have previously
claimed the Child Tax Credit on their returns. Since when you claim a child as a dependent on your tax return,
you input the child’s birth date, the IRS knows the age of your children and will know if they meet the age
requirements.

The IRS looks first at your tax return for 2020. If you did not file in 2020 or you did file but the IRS has not yet
processed your return, they will look at your 2019 tax return to see if you claimed any dependent children who
might still be 17 or younger in 2021.

If you have previously claimed the Child Tax Credit on recent tax returns or are otherwise considered to be
eligible by the IRS, you will be receiving several letters from the IRS in the mail. If you do not receive these
letters, it may indicate that the IRS does not consider you eligible to receive the Child Tax Credit, even if you do
qualify. 

For example, if you have not filed a tax return for 2020 or 2019, the IRS will not have records on you that it can
refer to. Likewise, if you have had a new baby or adopted a child since you filed your last tax return, the IRS has
no way to know this. If this is the case, you can register yourself with the IRS’ Child Tax Credit Non-filer Sign-up
Tool at https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool. 

How Much Money Do You Qualify to Receive?

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To know what to expect, you can calculate the amount you will receive based on your children’s ages and your
income.  To be clear, the income that the IRS is using to calculate the amount of your tax credit is your modified
adjusted gross income.
The modified adjusted gross income (MAGI) is your adjusted gross income or AGI (this can be found on your
previous year’s tax return, form 1040, line 7) plus the amounts of any of the following that apply to you: 

Deductions you took for IRA contributions and taxable Social Security payments
Foreign income you had excluded to get your AGI
Interest from any EE savings bonds you used to pay college tuition
Losses from a partnership
Passive income or loss
Rental losses
Adoption expenses

For most people, their modified adjusted gross income is the same as their adjusted gross income since the
add-backs do not apply to them.

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Generally speaking, you will receive up to $3,600 per child under the age of 6 and $3,000 per child for children
ages 6-17. However, these amounts can be reduced based on your income. The more you earn, the lower the
amount of the Child Tax Credit. 

There are two income benchmarks at which the Child Tax Credit is reduced. For every $1,000 you earn over the
two-income benchmarks, your Child Tax Credit is reduced by $50 per qualifying child. The first benchmark is if
you earn more than:

$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
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$75,000 if you are a single filer or are married and filing a separate return

The second benchmark is if you earn more than:

$400,000 if married and filing a joint return or 

 $200,000 if filing any other way

You can use this online calculator from H&R Block to calculate the amount of your Child Tax Credit:
https://www.hrblock.com/child-tax-credit-calculator/. 

Total Amount of Child Tax Credit Based on Income

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Amount for each child Amount for each child

MAGI range aged 0-6 aged 6-17

MAGI range: If you earn less than:$150,000 if Amount for each child Amount for each child
married and filing a joint return or if filing as a aged 0-6: $3,600 aged 6-17: $3,000
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

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 Amount for each child Amount for each child
MAGI range aged 0-6 aged 6-17

MAGI range: If you earn more than: $400,000 if Amount for each child Amount for each child
married and filing a joint return or $200,000 if aged 0-6: $2,000 minus aged 6-17: $2,000 minus
filing any other way $50 for every $1,000 or $50 for every $1,000 or
fraction above $400,000 fraction above $400,000
or $200,000, whichever or $200,000, whichever
applies applies

How and When You Will Receive the Money

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If you qualify, you will not receive the total amount of the Child Tax Credit at one time. Half of the Child Tax
Credit amount will be paid out in monthly payments and the remainder will be paid in a lump sum. The monthly
payments will be paid over a period of six months, beginning in July 2021. The payments will be sent on the
following dates according to the IRS:

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July 15
August 13
September 15
October 15
 November 15
December 15

You will receive either checks in the mail or direct deposits into your bank account, depending on what you had
previously set up with the IRS. However, you are able to set up or change your direct deposit information or
address that the IRS has on file for you by going on the IRS’ Child Tax Credit Update Portal at
https://www.irs.gov/credits-deductions/child-tax-credit-update-portal. 

You can also use this portal to check to see if you are enrolled to get the advance payments and to unenroll in
advance payments (see section “Will You Owe Money to the IRS Because of These Payments?” of this guide).

Will You Owe Money to the IRS Because of These Payments?

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It is possible that come tax time, you will owe some of this money back to the IRS. In effect, the advance
payments assume that when you file your 2021 taxes that all of the things that qualify you to receive the Child
Tax Credit have remained the same from 2020. 

However, if your family circumstances or income change, you may no longer qualify. For example, you may have
a child who is now older than 17, or your income for 2021 may be higher than on the previous year’s tax return.  

If you think this might be true for your family and that you will not meet the qualification requirements once it is
time to file your 2021 tax return, you can unenroll from the automatic payments. If you do not unenroll, you may
have to pay some of that money back when you file your taxes. 

Some people also may prefer to unenroll from the advance payments because they want to receive a bigger
lump sum refund after they file their taxes. You can unenroll online at https://www.irs.gov/credits-
deductions/child-tax-credit-update-portal.

How the Child Tax Credit Can Impact You

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The advance payments and increased amount of the Child Tax Credit can really make a difference to American
parents this year. Because of income lost during the pandemic, many families are struggling to pay overdue
bills, and the money from the Child Tax Credit can help fill in some of that gap. 
Certain tax experts estimate that the advance Child Tax Credit payments (the monthly portion) along with other
parts of the American Rescue Plan will reduce the number of American children living in poverty by at least half,
from 13.7% to 6.5% lifting millions above the poverty line.

Although you may get these payments automatically, it is not guaranteed because it depends on whether the
IRS thinks you qualify based on what it knows about you from your past tax returns. But circumstances change
and they may not have complete information. For example, if you have had a child or adopted a child since you
filed your 2020 taxes, you will only get the Child Tax Credit payments if you let the IRS know by registering
yourself. 

You may also have had a drop in income from 2020, due to the pandemic or some other reason, so the IRS may
not think you meet the income qualifications unless you tell them otherwise.

When you file your 2021 taxes, the advance payments of the Child Tax Credit will not count as income.
However, if you got more than you were actually entitled to, that extra amount will be added to your taxes due.