If you usually claim the child tax credit each year when filing your taxes, you may be pleased to know about the advance child tax credit. What is this credit? New for 2021, the IRS will pay eligible families one-half of the annual credit amount in the form of a monthly payment, sent as a check, to your bank account, or to a prepaid card. You can claim the other half when you file your taxes next spring. Keep reading for more information about this credit, how much of the child tax credit money you could receive early, and whether you could qualify.
Advance Child Tax Credit FAQs
This change to the child tax credit program has led to many inquiries. Here are some of the answers to your top questions:
How does the advance child tax credit work?
If you qualify for the advance, approximately half the amount you would be able to claim on your 2021 taxes as a child tax credit could be paid to you as a monthly payment. The IRS uses information from your 2019 or 2020 return to determine how many children you have and if they are of the right ages to qualify for the credit. They will also check your income to be sure it's within the eligibility range.
Unlike past years' child tax credits, where only a portion of the credit is refundable, the entire child tax credit is refundable in 2021. So, even if you don't owe or you are not required to file, you may be able to get the entire credit as either a refund, advance payments, or a combination of both (most common).
Which children qualify?
Children who are under the age of 18 on December 31st, 2021, and who have a valid Social Security number can be considered for the tax credit. The filing parent must have lived in the U.S. for more than half the year or have filed a joint return with a spouse who has.
How do I get my advance child tax credit?
If you've received a recent stimulus payment or tax refund from filing your 2020 taxes, the IRS will use the information they have on file for the advance child tax credit payments. Eligible taxpayers will be automatically enrolled, and you do not have to take any further action to get your payment.
If you need to update your account information with the IRS, you can do so in the Child Tax Credit Update Portal.
How much money will I get?
While there are income limits, the full amount of the credit is as follows:
- $3,600 for children ages 5 and under (up from $2,000)
- $3,000 for children ages 6-17 (up from $2,000)
If you make more than the modified adjusted gross income (MAGI) limits set by the IRS, however, that number gets reduced to $2,000 per child and then phases out $50 for every $1,000 you earn over the limit. Limits are currently:
- $150,000 for joint returns
- $112,500 for head of household returns
- $75,000 for single taxpayers
You can see your estimated amount by signing up at the Child Tax Credit portal on the IRS website.
Will I have to pay back the advance child tax credit?
The IRS uses your past years' returns to calculate what you may earn this year. However, if you go way over the amount and no longer qualify for part of the credit, you will make up the difference when you file. You are only getting an advance payment on half of the credit. If you earn more than the MAGI limits and your credit is reduced, this will be factored into the remaining half of your credit.
If you ended up getting more advance payments than what you can claim for the year, you might end up having to pay it back. The IRS will determine if you qualify for repayment protection based on your income or other factors. If you think you are at risk of being overpaid, you can update your information in the Child Tax Credit portal at any time.
Be proactive for the best tax benefits
If you qualify for the child tax credit, it's important to know how it works and what effect it may have on your year-end tax filing. If you're used to getting a large return every year, in part due to the child tax credit, you may not be getting as large of a refund. Keep in mind: The purpose of this advance payment is to get you part of that money now. Be sure to consider how getting your credit early will reduce your refund amount.
Currently, there are also people who may not want to get the advance payments, and the IRS has provided a link to opt-out at the Child Tax Credit portal. This same link takes you to a page to update your bank account information if it has changed since stimulus payments were sent out. (You must change this information before August 2 to have it take effect for the August 13 payment.) Also, if you haven't ever filed taxes before or don't think you have payment information on file with the IRS from the stimulus payments or another year's refund, you can also submit that information by visiting the Child Tax Credit portal.