Child Tax Credit: 2021 Advance Child Tax Credit Payments

Child Tax Credit in 2021 changes

There are important changes to the Child Tax Credit for tax year 2021. These changes apply to tax year 2021 only. The 2021 Child Tax Credit changes will help many families get advance payments of the credit. If you are qualifying and opt to receive the advance Child Tax Credit payments, half the amount of your 2021 estimated child credit will be disbursed in monthly installments starting July 15 through December 2021. You will claim the other half when you file your 2021 income tax return. 

The IRS will disburse these payments by direct deposit, as long as your correct banking information has previously been provided to the IRS. You should watch your mail around July 15 for the mailed payment. The dates for the Advance Child Tax Credit payments are July 15, August 13, September 15, October 15, November 15 and December 15.

Qualifying for advance Child Tax credit payments

In order to qualify for  advance Child Tax credit payments, you (and your spouse, if you filed a joint return), must have filed a 2019 or 2020 tax return and claimed the Child Tax Credit on your tax return.

Or you should have provided your information in 2020 to receive the Economic Impact Payment using the Non-Filers. In addition, your main home should be  in the United States including the 50 states and the District of Columbia for longer than half the year.

Or you filed a joint return with your spouse who has a main home in the United States for more than half the year. In order to qualify  for the advance Child Tax Credit payments, your child must be under the age of 18 at the end of 2021, have a valid Social Security number and make less than certain income limits. Please see Qualifying child of Child Tax Credit in the section below. 

What is the amount of Child Tax Credit payments for 2021?

$3,600 for children of age 5 and under at the end 2021( $2000 for 2020)

$3,000 for children from ages 6 to 17 at the end of 2021. 

Can your Child Tax Credit payments be reduced due to your 2021 income?

Yes, your child tax credit payments can be reduced based on your modified adjusted gross income (AGI) in 2021.

For the first phaseout, your Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI exceeds the threshold below:

Your 2021 modified AGI exceeds:	Filing status
$150,000	Married and filing a joint return or qualifying window(er)
$112,500	Head of household
$75,000	Single filing or married and filing a separate return

For the second phaseout, your Child Tax Credit begins to be reduced to under $2,000 per child if your modified AGI exceeds the threshold below:

Your 2021 modified AGI exceeds:	Filing status
$400,000	Married and filing a joint return
$200,000	Head of household  or qualifying window(er)
$200,000	Single filing or married and filing a separate return

Note: The phaseouts reduce your Child Tax Credit by $50 for each $1,000 (or fraction thereof) of your modified AGI exceeding the threshold above. 

For example lets say: your modified AGI for 2021 is $160,000; you are married and file a joint return; you have a child of age 5 who is qualifying for the Child Tax Credit. Then, your Child Tax Credit will be $3,100

Your Child Tax Credit calculation: $3,600 – ($50 *10) = $3,100

$3,600 for children ages 5 and under at the end 2021

Your Child Tax Credit is reduced by $50 for each $1,000 of your $160,000 modified AGI exceeding the threshold of $150,000.

($160,000 -150,000) /1000 = 10

How is the amount of your advance Child Tax Credit payments determined?

The IRS will determine your advance Child Tax Credit payment amounts by estimating the amount of the Child Tax Credit that you will claim on your 2021 tax return during the 2022 tax filing season.

The IRS will use the information of your processed 2020 tax return (or your 2019 tax return if your 2020 tax return has not been processed by the IRS)  to estimate your 2021 Child Tax Credit. When the IRS has processed your 2020 return, your advance Child Tax Credit payments and adjustments of any remaining monthly payments will be calculated.

Note that advance Child Tax Credit payment amounts do not include the $500 Credit for Other Dependents.

How much will you receive in advance Child Tax Credit payment?

Your total advance Child Tax Credit payment amounts will equal half of the amount of your estimated 2021 Child Tax Credit. This amount is then divided into monthly payments and sent in advance to you.

For each of your qualifying children of age 5 or younger, you generally will receive $300. The amount is calculated by dividing $3,600 (2021 Child Tax Credit for children ages 5 and under) in half, which is $1,800. The $1,800 will be divided into 6 monthly payments of $300

For each of your qualifying children from ages 6 to 17, you will receive $250. The amount is calculated by dividing $3,000 (2021 Child Tax Credit for children ages 6 to 17) in half, which is $1,500. The $1,500 will be divided into 6 monthly payments of $250.

Qualifying child of Child Tax Credit

A child qualifying you for the Child Tax Credit must meet all of the following conditions:

1.The child is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them such as your grandchild, niece, or nephew.

2. The child is under age 18 at the end of the tax year. 

3. The child did not provide over half of his or her own support for the tax year. 

4. The child lived with you for more than half of the tax year.  

Exceptions: 

If the child died in the tax year and your home was this child’s home for more than half the time the child was alive. Also, if you or your child was temporarily away from your home  for situations such as school, vacation, business, medical care, military service, or detention in a juvenile facility, you can count those as times when the child lived with you. In addition, there are exceptions for kidnapped children and children of divorced or separated parents. 

5. The child is claimed as a dependent on your tax return. 

6. The child does not file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid). 

7. The child was a U.S. citizen, U.S. national, or U.S. resident alien or adopted. 

You can check if your child would qualify for the Child Tax Credit or the credit for other dependents at IRS.gov

What is your modified AGI?

For purposes of the Child Tax Credit and advance Child Tax Credit payments, your modified AGI is your adjusted gross income which is obtained from the 2020 IRS Form 1040, line 11, or the 2019 IRS Form 1040, line 8b, plus the following amounts that may apply to you.

• Any amount on line 45 or line 50 of the 2020 or 2019 IRS Form 2555, Foreign Earned Income.
• Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.

If you do not have any of the amounts above, your modified AGI is the same as your AGI.

Updating your Child Tax Credit information for the advance Child Tax Credit payments

The IRS will provide you a Child Tax Credit Update Portal on IRS.gov before the first payment begins. Update your information on the IRS website if you need when it is available. The Child Tax Credit Update Portal will allow you to update your qualifying child information, bank information, address, income changes, filing status and so on. 

This information will allow the IRS to adjust your advance Child Tax Credit payments. The Child Tax Credit Update Portal also allows you to opt not to receive advance Child Tax Credit payments. If you do not receive advance Child Tax Credit payments for a qualifying child that you will claim in 2021, you may claim the full amount of your allowable Child Tax Credit for that child when you file your 2021 tax return.

How will you receive advance Child Tax Credit payments?

Your advance Child Tax Credit payment will be sent to you as a direct deposit if the IRS has received your banking information. The IRS will obtain your bank information from your 2020 or  2019 tax return; information which you entered on Get My Payment in 2020 or from a federal agency such as the Social Security Administration, Department of Veterans Affairs or the Railroad Retirement Board. If the IRS does not have bank account information, your advance Child Tax Credit payments will be sent to you by mail. You should watch your mail from around July 15.

Questions and Answers – Child Tax Credit: 2021 Advance Child Tax Credit Payments

1. When will advance Child Tax Credit payments be disbursed?

Advance Child Tax Credit payments will be disbursed in monthly installments starting July 15, 2021 through December 2021. The dates for the Advance Child Tax Credit payments are July 15, August 13, September 15, October 15, November 15 and December 15.

2. Will the IRS inform you about the advance Child Tax Credit payments before disbursing them?

Yes,  the IRS will inform you about the advance Child Tax Credit payments before disbursing them. The IRS will send you Letter 6417. This letter will inform you of the amount of your estimated Child Tax Credit monthly payments and additional information about advance Child Tax Credit payments. 

3. What do you need to do to receive advance Child Tax Credit payments?

If you are eligible to receive advance Child Tax Credit payments based on your 2020 tax return or 2019 tax return (including information you entered into the Non-Filer tool for Economic Impact Payments on IRS.gov in 2020), you generally will receive those payments automatically without needing to take any additional action.

If you have not filed your 2020 tax return or 2019 tax return, you must take actions. The IRS will make available an online Non-Filer tool allowing individuals who weren’t required to file (and have not filed) a tax return for 2020 to file a tax return and register for advance Child Tax Credit payments and the third Economic Impact Payment. Also, you can visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms, Child Tax Credit Non-filer Sign-up Tool, or find a trusted tax professional.

3. What will you do if you do not want to receive the advance Child Tax Credit payments?

The IRS will provide you a Child Tax Credit Update Portal. The Child Tax Credit Update Portal also allows you to unenroll from receiving advance Child Tax Credit payments. If you do not receive advance Child Tax Credit payments for a qualifying child that you will claim in 2021, you may claim the full amount of your allowable Child Tax Credit for that child when you file your 2021 tax return.

4. Will your advance Child Tax Credit payments be affected if your 2021 income will change ?

Yes, if your income changes in 2021, then your Child Tax Credit can be affected.The IRS provides you a Child Tax Credit Update Portal on IRS.gov before the first payment begins. The Child Tax Credit Update Portal will allow you to update your qualifying child information, bank information, address, income changes, filing status and so on. This information will allow the IRS to adjust your advance Child Tax Credit payments.

5. Will the advance Child Tax Credit payments be affected if you owe past due taxes?

No.  Advance Child Tax Credit payments will not be reduced for overdue taxes from previous years or other federal or state debts. However, if you receive a refund when you file your 2021 tax return, any remaining Child Tax Credit amounts included in your refund may be subject to offset for tax debts or federal, state debts. 

6. Will the advance Child Tax Credit payments affect any government benefits that you receive?

No.  Advance Child Tax Credit payments will not be counted as your income when determining if you or anyone else is eligible for benefits or assistance. 

7. Will you need to repay advance Child Tax Credit payments to the IRS if the payments are larger than your allowed Child Tax Credit for 2021?

You won’t need to repay any excess amount if your main home was in the United States for longer than half of 2021, plus your modified AGI for 2021 is at or below the following amount:

Your 2021 modified AGI is at or under	Filing status
$60,000	Married and filing a joint return or qualifying window(er)
$50,000	Head of household
$40,000	Single filing or married and filing a separate return

Your repayment protection may be limited if your modified AGI exceeds these amounts or your main home was not in the United States for more than half of 2021.

8. Will you receive an advance Child Tax Credit payment if you are a resident of American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, or the U.S Virgin Islands?

You may be eligible for advance Child Tax Credit payments. You should contact your local territory tax agency for additional information about changes to the 2021 Child Tax Credit and advance payments.

9. What should you do if you received advance Child Tax Credit payments for your qualifying child, but your child moved in with the other parent?

In order for you to claim the Child Tax Credit payments for your qualifying child, the other parent needs to agree and allow you to do so. The other parent needs to sign Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. You need to attach the form to your 2021 tax return to claim the Child Tax Credit.

On the other hand, you can remove the child from your Child Tax Credit information provided to the IRS using the Child Tax Credit Update Portal.  You can opt to unenroll from receiving advance Child Tax Credit payments. 

In this case, if you do not take any actions and receive advance Child Tax Credit payments, you may need to repay to the IRS the amount which you received based on this child when you file your 2021 tax return next year.

Sources: 

Internal Service Revenue. Advance Child Tax Credit Payments in 2021.

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021. Accessed on June 16, 2021