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Child Tax Credit Advance

The first advance payments were sent out July 15th and the second payment is just around the corner. Did you receive the first one? Should you? Here are few facts to break down the details.

Limited-Time Only

The advance started July 15th and is only planned to pay out until December 15th. It is planned so that you will receive approximately 50% of the credit now and the remaining 50% when you file your taxes - if you are eligible!

Please note, this is not additional funds like any stimulus you may have received, this is an advance of a credit that you might otherwise receive when you file your taxes. Receiving this credit monthly may affect your refund/payment amounts when you file in 2022!

Read on to see if you are eligible and should be receiving benefits and if you will remain eligible throughout 2021. If your circumstances change during the year, you may not be entitled to the full credit amount.

Auto-Enrollment 

To have qualified for these payments you must have:

  • Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
  • Given the IRS your information in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool; and
  • Maintain a main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and
  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
  • Made less than certain income limits.1

Credit Amount

For 2021, the child tax credit was increased from the previous $2,000 per qualifying child to 

  • $3,600 for children ages 5 and under at the end of 2021
  • $3,000 for children ages 6 through 17 at the end of 2021

Income limits to keep an eye on as you earn income through 2021

For purposes of the Child Tax Credit, your modified Adjusted Gross Income (AGI) is considered. The Credit Calculation considers  your adjusted gross income (line 11 from 2020 IRS Form 1040 or, line 8b from  2019 IRS Form 1040) 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 above, your modified AGI is the same as your AGI.

Once you have your know your modified AGI you’ll need to compare it to the phaseouts listed in the table.2

First Phase Out

The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds the numbers below. The reduction is $50 for each $1,000 of modified AGI above these thresholds.

Filing Status

Modified AGI

Married Filing Joint ;

Qualifying Widow or Widower

$150,000

Head of Household

$112,500

Single;

Married Filing Separately

$75,000

Second Phase Out

If your income exceeds the amounts below, the Child Tax Credit will be reduced below $2,000. Again, the credit is reduced $50 for each $1,000 of modified AGI above the thresholds.

Filing Status

Modified AGI

Married Filing Joint 

$400,000

All Others

$200,000

 

Manage Your Advance Child Tax Credit

If you did not receive your payment and believe that you should have or, if you would like to stop receiving the advance for any reason, please visit the Child Tax Credit Update Portal. You can also make updates in the portal if your family has expanded with the birth of a new child this year.

If you choose to opt out of the advance payments and you file a joint tax return with your spouse, both of you will have to visit the Child Tax Credit Update portal to make the election. 

  


1 https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-c-calculation-of-the-2021-child-tax-credit

 21:5 Wealth Management, nor any of its members, are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional.