The information provided on this page is for educational and informational purposes only. It is not, and should not be taken as, financial, tax or legal advice of any kind.
The 2021 Child Tax Credit is a tax deduction that taxpayers with qualifying dependents may use to reduce the federal income tax they owe for the 2021 tax year. In many cases, those eligible for the Child Tax Credit received advanced payments through the same means as their last tax refund, such as by direct deposit or mailed check.
The Internal Revenue Service (IRS), the taxing agency of the federal government, is in charge of everything relating to the Child Tax Credit. The IRS decides who is eligible and how much money (if any) they can receive. The IRS also distributes the advanced payments directly to American families.
Congress has changed the Child Tax Credit in a variety of ways as part of the COVID relief provisions in the American Rescue Plan passed in March 2021. The purpose of the changes to the Child Tax Credit is to get more money to American families since many families have suffered financially during the COVID pandemic. The changes in the Child Tax Credit include the amount, the timing, income requirements and the amount that is refundable.
Since these changes were put in place to help mitigate financial hardship from job losses and closures due to the COVID-19 pandemic, they were only valid for 2021. The government has not yet passed regulations about credits for the 2022 tax year.
Who Can Qualify for Child Tax Credit?
The basic requirements include having one or more children younger than 18 years old with a valid Social Security number and earning less than certain income limits. One of the new rules removed the income minimum requirement for the 2021 tax year. But you may not qualify for for the Child Tax Credit if your adjusted gross income is more than:
- $200,000 as a single or head of household filer.
- $400,000 as a married couple filing jointly.
The vast majority of the people receiving the Child Tax Credit are taxpayers who claimed the Child Tax Credit on their previous tax returns. If you are a parent who has already claimed the Child Tax Credit on recent tax returns or are otherwise considered to be eligible by the IRS, you should receive several letters from the IRS in the mail. Nevertheless, some people who did not file a tax return in 2021 or 2020 or did not previously claim the Child Tax Credit may also qualify.
Learn About Child Tax Credit Payments
The Child Tax Credit for the 2020 tax year was $2,000 per qualified dependent 16 years of age or younger. Congress increased the age limit to 17 years of age or younger for the 2021 tax year. Likewise, the maximum amount increased to:
- $3,000 per child six years of age or older.
- $3,600 per child younger than six years old.
You may qualify for the maximum 2021 Child Tax Credit if you earned:
- Less than $75,000 as a single filer.
- Less than $112,500 as a head of household filer.
- Less than $150,000 as a married couple filing jointly.
The IRS decreases the maximum tax deduction to $2,000 if your income is more than the above amounts but less than $200,000 as a single or head of household filer or $400,000 as a married couple filing jointly. Then, the IRS reduces $50 for every $1,000 of income more than the maximum income limits for your tax filing. The more money you earn, the lower the amount of the Child Tax Credit you will qualify for.
When and How Can You Receive Payments?
The IRS sent qualified taxpayers half of their Child Tax Credit amount in six monthly payments from July through December 2021. They received the rest in a lump sum after they filed and the IRS processed their 2021 taxes.
However, you may still qualify for the Child Tax Credit if you have yet to file your 2021 tax return. The federal government has tax assistance software through the IRS website to help you file for free if you earn less than $73,000. Or, you can file a simple tax return to claim your Child Tax Credit in about 15 minutes if your income is less than:
- $12,500 as a single filer.
- $25,000 as a married couple filing jointly.
You will either get checks in the mail or direct deposits into your bank account, depending on what you had already set up with the IRS. However, if you need to, you can set up or change your direct deposit information or address that the IRS has on file for you.
Will You Need to Pay the IRS Back?
It is possible that when tax time comes around, you will owe some of the money from the Child Tax Credit back to the IRS. This is because the advance payments are calculated assuming that when you file your 2021 taxes, all of the things that qualify you to receive the Child Tax Credit stay the same.
However, it is possible that if your family circumstances or income changes, you may no longer qualify. For example, your child may now be older than 17, or maybe your 2021 income might be more than on the previous year’s tax return. If you think this is the case, you can unenroll from the automatic payments. Unenrolling may help you avoid potential tax liability as a result of the Child Tax Credit advance payments.
The Child Tax Credit and its Impact on American Households
The advance payment schedule and increased amount of the Child Tax Credit made a big difference to American parents last year. Because of jobs and other income lost during the pandemic, many families are struggling to pay overdue bills, and the money from the Child Tax Credit can help get families current with their financial responsibilities.
The Child Tax Credit helped around 65 million American children and kept an estimated 3.7 million children out of poverty, according to the Center on Poverty and Social Policy at Columbia University.
Other provisions of the Child Tax Credit will have the effect of reducing racial disparities since millions of African-American and Latino families who previously did not qualify under the old rules qualified in 2021.
Although most Americans with dependent children automatically recieved these payments, it is not guaranteed that you will receive them. Whether you get them depends on whether the IRS thinks you qualify based on the information it has from your past tax returns.
However, circumstances sometimes change and the IRS may not have current information. For example, if you have had a baby or adopted a child since you filed your 2020 taxes, you can only get the Child Tax Credit payments if you let the IRS know by registering yourself.
You might also have earned too much to qualify in 2020 but then had a drop in income in 2021 due to the pandemic or some other reason; the IRS may not think you meet the income qualifications unless you tell them otherwise.