July 15, 2021
What The New Child Tax Credit Means for Families in 2021
In the 2021 tax year, The Child Tax Credit amount will increase from $2,000 (per qualifying child) to up to $3,000 (per qualifying child ages 6-17). Before 2021, a qualifying child turning 17 by the end of that tax year would not be eligible for the Child Tax Credit. For a qualifying child under age 6 at the end of 2021, The Child Tax Credit amount will increase from $2,000 per qualifying child to up to $3,600.
For international families, you may also be able to claim the child tax credit. Though this depends on where your main home is during 2021 and will determine how much you can claim. If your family has been abroad for part of the year, we would recommend working with a tax services provider specialized in global taxation, like Glomotax. If you are not already working with a professional tax consultant, we have broken down the new Child Tax Credit changes below.
Updated Tax Credit Rules
The Child Tax Credit now consists of two separate phase-out amounts. The amount at which the credits begin phasing out is shown below.
The original amounts ($2,000 for a qualifying child aged 6-17 and $2,000 for a qualifying child up to age 6) will begin phasing out at these modified adjusted gross income limits:
- $200,000 for Single, Married Filing Separately and Head of Household
- $400,000 for Married Taxpayers Filing Jointly
The additional, increased amounts ($1,000 for a qualifying child aged 6-17 and $1,600 for a qualifying child up to age 6), will begin phasing out at the following modified adjusted gross income limits:
- $75,000 for Single and Married Filing Separately
- $112,500 for Head of Household
- $150,000 for Married Taxpayers Filing Jointly
Advance Payments for Those Who Qualify
The IRS will pay half (50%) of the 2021 tax year estimated child tax credit amount in advance monthly payments, beginning July 15, 2021, and ending December 15, 2021. The advance payments are currently only for the 2021 tax year. Payments will be sent to taxpayers directly to their bank or by mail.
The maximum amounts to be received are:
- For a qualifying child under age 6 at end of 2021 – $1,800 (Six payments of $300)
- For a qualifying child aged 6-17 at the end of 2021 – $1,500 (Six payments of $250)
If you would like to learn more about the process of receiving advanced payments from the IRS, you can read about it here.
To receive Advance Child Tax Credit payments you will meet these requirements:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit
- Have a main home in the US for more than half the year or file a joint return with a spouse who has a main home in the US for more than half the year. Your main home is the location in which you regularly live.
- Have a qualifying child who is under age 18 at the end of 2021.
- Satisfy the income limitations under the new Child Tax Credit rules.
Note that any amounts not received as advance credits can still be claimed on the actual tax return, as long as you meet the requirements.
If the total amount of Advanced Child Tax Credit Payments that you receive in 2021 is greater than the amount that you are allowed to claim on your 2021 return, you will repay the excess amount in 2022 on your 2021 tax return.
The new Child Tax Credit was created in alignment with the American Rescue Plan’s goal to help families. Your family may be eligible to claim the child tax credit as a result of the new update. You may even begin receiving advance payments beginning on July 15th. If you or your family has questions about your eligibility for the Child Tax Credit or are seeking help calculating your credit or payments, contact us.
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