2021 Child Tax Credit


Article Posted on 12/10/2021


The IRS has updated its frequently asked questions (FAQs) on the 2021 Child Tax Credit and Advance Child Tax Credit payments. The updated FAQs describe how taxpayers can use the Child Tax Credit Update Portal to provide the IRS with an estimate of their 2021 income.

2021 Child Tax Credit. A taxpayer may claim a tax credit for each "qualifying child" for whom the taxpayer is allowed a dependency deduction.

For 2021, the credit is $3,000 ($3,600 for children under age six) per qualifying child.

For 2021 only, the definition of qualifying child is expanded to include a child who hasn't attained age 18 before the close of 2021.

The CTC is phased out for taxpayers with modified adjusted gross income (MAGI) above certain levels. For 2021, taxpayers are subject to two different sets of phaseout rules, a phaseout of the increased CTC amount (i.e., $1,000 or $1,600), which begins at lower MAGI thresholds, and then the usual phaseout rules for the $2,000 credit amount.

Advance Child Tax Credit. The IRS will make monthly advance payments in July-Dec. 2021 equal to 50% of eligible taxpayers' 2021 CTCs (ACTC payments). Eligibility for ACTC payments will be determined based on taxpayers' 2020 returns, or if they are not yet filed, their 2019 returns. 

A taxpayer's CTC for 2021 must be reduced by the aggregate ACTC payments the taxpayer received during 2021. Taxpayers who receive ACTC payments that exceed the taxpayer's allowable CTC for 2021 must, generally, repay the excess by increasing the tax liability reported on their 2021 returns. 

Updated FAQs. The IRS has updated the CTC and ACTC FAQs on its website by adding new questions and answers.

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