With the passage of the American Rescue Plan comes changes to the Child Tax Credit for 2021. There are several elements to the changes for this credit.
Maximum credit – The maximum credit in 2021 is $3,600 for children under the age of 6 and $3,000 for children ages 6 through 17. This increased from $2,000 per child.
Qualifying Age – For 2021, qualifying taxpayers can claim this credit for dependents through the age of 17. Prior to the American Rescue Plan, this credit could not be claimed for children age 17.
Advance Child Tax Credit Payments – for 2021 only, qualifying taxpayers may receive advance payments of their estimated 2021 child tax credit.
Advance payments of the 2021 child tax credit will be made regularly on the 15th of the month, from July through December 2021 to eligible taxpayers. The advance payments will be up to 50% of the child tax credit. The figure is based on the taxpayer’s 2019 or 2020 tax return.
These monthly advance payments will be up to $300 per child between the ages of 0 and 5 and $250 for children between the ages of 6 and 17.
Qualified taxpayers will receive these payments in the form of direct deposit or by mail.
The IRS will open a portal in July for taxpayers who wish to opt out of the advance payments or need to update their information (income, marital status, change in the number of qualifying children and direct deposit information, etc.) At this time, taxpayers will not have the ability to add new dependents on this portal. UPDATE: The IRS has set up a portal for taxpayers to view eligibility for the credit, view advance payments or opt out of advance payments.
It is important for taxpayers to keep track of the advance child tax credit payments received, as a reconciliation must be completed on the 2021 tax return. The IRS will be issuing Letter 6419 in January 2022 showing total advance CTC payments received and the number of qualifying children used to calculate the advances. This letter should be provided to your tax preparer.
Refundable/Non-Refundable – Previously, the refundable portion was limited to $1,400 for each qualifying child. For 2021, the child tax credit is fully refundable.
Below is a table that shows the changes in the child tax credit.
|Child Tax Credit – 2021 ONLY||Child Tax Credit 2018 – 2025 (excluding 2021)|
|Ages:||Maximum Credit –||Maximum Credit –|
|Ages 0 – 5||$3,600 per qualifying child||$2,000 per qualifying child|
|Ages 6 – 16||$3.000 per qualifying child||$2,000 per qualifying child|
|Age 17||$3,000 per qualifying child||Not qualified|
|Maximum Refundable Portion||Fully refundable||$1,400 max (15% of earned income above $2,500)|
|Advance Child Tax Credit Payments||Yes||No|
At this time, this enhanced tax credit expires in 2021.
UPDATE November 1, 2021 – Today, the IRS will be updating the portal to launch a new feature allowing any family receiving monthly Child Tax Credit payments to update their income using the Child Tax Credit Update Portal (CTC UP), found exclusively on IRS.gov. See this article for additional information.
See the following IRS article for additional information: