The American Rescue Plan passed by Congress in March of 2021 included important changes to the child tax credit. Prior to its passage, the child tax credit was $2,000 per qualifying child with up to $1,400 available as a refundable credit. In 2021, the credit has been increased to $3,000 per qualifying child between the ages of six and 17 and $3,600 per qualifying child under age six.
In an effort to assist families struggling with the effects of the Coronavirus, lawmakers decided to pay a portion of the credit through advanced payments. These payments will be made monthly from July through December in the amount of $250 per qualifying child ages six to 17 and $300 per qualifying child under age six. The remaining portion of the credit will be refunded when filing your 2021 income tax return. Unlike prior years, the full amount of the Child Tax Credit is refundable, meaning you can claim the entire credit even if you do not have earned income or do not owe any income taxes.
The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI). The first phaseout reduces the credit to $2,000 per child if your AGI in 2021 exceeds $150,000 married filing joint, $112,500 for head of household filers, and $75,000 if you are a single filer or married filing separate. The second phaseout begins to reduce the remaining $2,000 credit for anyone whose AGI exceeds $400,000 filing jointly or $200,000 for all other filing statuses, with the credit completely phasing out at $440,000 and $240,000, respectively. To see what you may qualify for, try using this 2021 Child Tax Credit calculator.
If you did not file a tax return in 2019 or 2020 and did not use the IRS non-filers tool to register for Economic Impact payments, you will need to provide some information to the Internal Revenue Service in order to receive advanced payments. Click here to access the IRS non-filer sign-up tool.
If you do not wish to receive advanced monthly payments, the IRS has created an online portal for you to opt out. If filing a joint return, both you and your spouse will need to unenroll.