Big changes were made to the child tax credit for the 2021 tax year. The two most significant changes impact the credit amount and how parents receive the credit. First, the credit amount was temporarily increased from $2,000 per child to $3,000 per child ($3,600 for children 5 years old and younger). Second, it authorized advance payments to eligible families from July to December 2021. Half the total credit amount was paid in advance with the monthly payments last year, while the other half is claimed on the 2021 tax return that you file this year. (These changes only apply for the 2021 tax year.)
However, not everyone will get the additional credit amount. And some families won't get any child tax credit at all. That's because the credit is reduced – and possibly eliminated – for people with an income above a certain amount. In fact, there are two "phase-out" rules in play – one just for the extra $1,000 (or $1,600) amount and one for the remaining credit. That makes calculating the total child tax credit (and the monthly payments you should have gotten last year) very tricky.
But don't worry – we've got you covered. If you want to see how large your credit will be, simply answer the four questions in the calculator below and we'll give you a customized estimate of (1) the amount you should have received each month last year from July to December, and (2) how much you can claim as a child tax credit on your 2021 tax return, which is due April 18, 2022, for most people. It's that easy!
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(Note: Results assume you received six monthly child tax credit payments last year.)
Pre-2021 Child Tax Credit Amount
For the 2020 tax year, the child tax credit was $2,000 per qualifying child. It was gradually phased-out (but not below zero) for joint filers with a modified adjusted gross income (AGI) of $400,000 or more and for other taxpayers with a modified AGI of $200,000 or more.
(For purposes of the child tax credit, modified AGI is the amount of adjusted gross income shown on Line 11 of your 2020 Form 1040 or Line 8b of your 2019 Form 1040, plus any amount excluded from gross income on your tax return as foreign earned income; foreign housing expenses; or as income from sources within Puerto Rico, Guam, American Samoa or the Northern Mariana Islands.)
New Phase-Out Scheme for 2021
For 2021, the increase (i.e., the extra $1,000 or $1,600) is gradually phased-out for joint filers with a modified AGI of $150,000 or more, head-of-household filers with a modified AGI of $112,500 or more, and all other taxpayers with a modified AGI of $75,000 or more. However, the increase can't be reduced below zero (other limitations to this reduction will apply as well).
After any reduction of the increased credit amount is calculated, the pre-existing phase-out is then applied to the remaining credit amount. So, for joint filers with a modified AGI of $400,000 or more and other taxpayers with a modified AGI of $200,000 or more, the credit is subject to an additional reduction – possibly to $0.
Reconciliation of Advance Payments
When you fill out your Form 1040 this year, you'll have to compare the total amount of advance child tax credit payments that you received in 2021 with the amount of the actual child tax credit that you can claim on your 2021 return.
For most people, the amount of the credit will exceed the advance payments you received. If this is the case, you can claim the excess credit on your 2021 return. However, if the IRS paid you too much in monthly payments last year (i.e., more than the child tax credit you're entitled to claim for 2021), you might have to pay back some of the money. Parents with 2021 modified AGI no greater than $40,000 (single filers), $50,000 (head-of-household filers), or$60,000 (joint filers) won't have to repay any child tax credit overpayments. However, families with a modified AGI from $40,000 to $80,000 (single filers), $50,000 to $100,000 (head-of-household filers), or $60,000 to $120,000 (joint filers) will need to repay a portion of any overpayment. Parents with modified AGIs above those amounts will have to pay back the entire overpayment.
For more information on the 2021 child tax credit, see Child Tax Credit FAQs for Your 2021 Tax Return.
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