Child Tax Credit 2021: Eligibility and Payments

On July 15, 2021, more than 36 million eligible American families received their first CTC payment.

For this year only, the CTC is fully refundable. The CTC has also increased from $2,000 to $3,600 per child for children under the age of six and $3,000 for children ages six and older. Additionally, the age limit for qualifying children was raised from age 16 to 17.

How will I know if the IRS sent me the periodic child tax credit (CTC) payments?

If the IRS determined you were eligible for the advanced payments, you received a letter in the mail. The first letters were mailed beginning June 4, 2021 and informed the taxpayers they may be eligible to receive the advanced CTC payments. See letters 6416 and 6416-A here.

The second batch of letters were mailed to eligible taxpayers on June 28, 2021 and informed them of the expected monthly payments amounts. This letter (6417) has a message from President Biden as well.

The final letter will be issued no later than January 31, 2022 and will provide the total amount of advanced CTC received by the taxpayer during 2021. This letter will be required to complete the taxpayer’s 2021 tax return.

Keep these letters with your tax records as you will need them to file your 2021 tax return.

How will I know the amount of my child tax credit (CTC) payments?

The IRS will be issuing the final Advance Child Tax Credit payment letter 6419 in January 2022. These letters will include the total amount of payments received and the number of children used to determine the payments amount. You can also log into your Child Tax Credit Update Portal (CTCUP) on irs.gov to get the payments made during 2021.

If I received Advance Child Tax Credit payments what do I do now?

The IRS only paid a total of half of the 2021 Child Tax Credit with the advance payments. The payments received must be reconciled on your 2021 tax return. Most taxpayers will be eligible for an additional amount of credit. 

If you were not required to file a tax return, but were eligible for the Advance Child Tax Credit payments, the IRS provided an online Non-Filer sign-up tool. The IRS Non-Filers tool was similar to the one used for the Economic Impact Payments and could be used by those who needed to register to claim their third round of Economic Impact Payments (also known as stimulus payments). If you used the Non-Filer tool for the first or second stimulus check, you do not need to use the new tool to receive the Advance Child Tax Credit payments.

You will also need to file a 2021 tax return to receive any additional credits even when you do not have to otherwise file a tax return.

Who was eligible for the Child Tax Credit payments?

All legal guardians with a qualifying dependent child (see the dependent rules below) are eligible. This not only includes birth parents, but also grandparents, foster and adoptive parents, shared-custody parents, and more. These rules are for the advance payments and the actual child tax credit on the tax return.

Taxpayers must have met the following requirements for the advance Child Tax Credit payments:

• They must have filed a 2019 or 2020 return and claimed the Child Tax Credit; or
• Entered the required information in the Economic Impact Payment Non-Filers tool or the new Advance Child Tax Credit 2021 Non-Filer tool.
• Have a main home in the U.S. for more than half the year.
• Have a qualifying child under age 18 at the end of 2021.
• Made less than the credit threshold limits.

An individual must have also met the following requirements to be a qualifying child:

• They must have a Social Security number (SSN).
• They must be under age 18 at the end of 2021.
• The taxpayer must be related to the child and/or have legal guardianship.
• The child must live with the taxpayer in the U.S. for more than half the year.
• The child can’t provide more than half of their own support.

Note: More than half a year means six months and one night at a minimum, so you may benefit from keeping a log of where the child spends each night if you share custody.

The Child Tax Credit Update Portal (CTCUP) , https://www.irs.gov/credits-deductions/child-tax-credit-update-portal is available to all taxpayers who set up an irs.gov ID.me account https://www.id.me/individuals/government.

Child Tax Credit (CTC) Income Limits

The full Child Tax Credit is available to taxpayers with an Adjusted Gross Income (AGI) of less than:

• $75,000 for taxpayers using the Single and Married Filing Separately filing statuses.
• $112,500 for taxpayers using the Heads of Household filing status.
• $150,000 for taxpayers using the Married Filing Jointly and Qualified Surviving Spouse with Dependent Child filing statuses.

The phase out rate for the credit is $50 for each $1,000 of adjusted gross income (AGI) over the threshold amount.

Will I continue to get the Advance Child Tax Credit in 2022?

As of December 15, 2021, there is no plan to continue with the expanded Child Tax Credit amounts, the rules allowing the much higher amount and the change in age for the children.  There is also no plan to continue with the Advance Child Tax Credit payments. 

How much will my Child Tax Credit be on my tax return?

The monthly advance Child Tax Credit payments were as much as $300 for each child under six and $250 for each child six and older. The remaining half of the credit for eligible may be claimed when the advanced payments are reconciled with the total eligible Child Tax Credit on the 2021 income tax return. If taxpayers received more advanced credit than they are eligible for, they may have to repay the advanced payments when they file their 2021 federal tax return. 

How often were the Advance Child Tax Credit (AdvCTC) payments made?

The IRS made monthly payments beginning in July 2021 using the following schedule:

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

What if I got advance child tax credit payments and I wasn’t eligible? Will I have to pay it back?

Some taxpayers may not have to repay their advance Child Tax Credit payments. The repayment protection is a safe harbor program for certain taxpayers who received more advance Child Tax Credit than they qualified for, based on their filed 2021 tax return. This program can reduce or eliminate the amount of advance payment required to be repaid when the 2021 tax return is filed. The repayment protection amounts are based on the taxpayer’s filing status and Modified Adjusted Gross Income amounts (MAGI), which is generally the Adjusted Gross Income (AGI) amount.

The phase out is $2,000 per child and is based on Modified Adjusted Gross Income:

¹Taxpayers with a modified AGI below the phaseout threshold will not have to repay up to $2,000 per child in advance child tax credit.

²Taxpayers with a modified AGI between the minimum and maximum threshold amounts will have their safe harbor amount reduced and will generally repay part of their advance payments.

³Taxpayer with a modified AGI above the maximum threshold amounts will have to repay their advance payments.

If you have questions, now is the time to work with an experienced Tax Pro at Jackson Hewitt. Find a location near you.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

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