2023 Update: the below archived article is relevant to 2022 tax return filings for the Child Tax Credit in the 2021 tax year only. The 2022 and 2023 Child Tax Credit reverts to 2020 levels with some slight modifications. Check out that overview for full details.
I may be childfree, but I occasionally try to be selfless too. To that end, I decided to compile an overview of everything parents need to know about the expanded new Child Tax Credit in 2021 that was included in the American Rescue Plan as a COVID relief measure. Advanced monthly Child Tax Credit payments are coming in July for those who’ve played their cards right, so you may want to be aware of the somewhat complex details.
As a primer on the expanded new Child Tax Credit in 2021, I’d also recommend reviewing my previous Child Tax Credit overview, which covers eligibility, amounts, and other key details. There are a few large changes with this year’s Child Tax Credit that I will highlight in detail in this article, but the rest of the details remain the same, and without an extension, will be reverted to next year.
Expanded New Child Tax Credit Amounts for 2021
The expanded 2021 Child Tax Credit increases to:
- $3,600: for children under age 6
- $3,000: for children age 6 through 17 (was 16 in prior years)
Monthly Child Tax Credit Payment Amounts and Timeline
One of the big changes this year is that the expanded Child Tax Credit will be partially distributed in monthly payments starting in July of 2021 and continuing through December of 2021.
The 2021 monthly Child Tax Credit payment amounts will be:
- $300: for children under age 6
- $250: for children age 6 through 17
In doing the math, the total distributed in 2021 will be:
- $1,800: for children under age 6
- $1,500: for children age 6 through 17
That’s 50% of the total expanded credit amount. These monthly payments are considered an “advance” on the Child Tax Credit claimed on end-of-year tax filings, in an effort to get more help to American families ASAP, while the country is still battling the economic effects of the COVID-19 pandemic. The remaining half of the credit will need to be claimed when filing 2021 tax returns in 2022.
Check out my article on the expanded Child Tax Credit payment details for more info.
2021 Child Tax Credit Income Limit Phaseouts & Safe Harbor:
The expanded Child Tax Credit is not for everyone with children. Phaseouts for the increased credit amounts begin at an AGI of:
- $75,000 for Individuals
- $112,500 for Head of Household
- $150,000 for Married Filing Jointly
The income phaseouts reduce the expanded portion of the credit by $50 for each additional $1,000 in income.
If over the phaseout income levels, phaseouts for the standard $2,000 credit go into effect and begin with a modified adjusted gross income (MAGI) of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers.
On the other end of the income spectrum, if income levels are below the following “safe harbor” amounts, then filers may be shielded from having to repay credit overpayments:
- $40,000 for Individuals
- $50,000 for Head of Household
- $60,000 for Married Filing Jointly
Other Noteworthy Child Tax Credit Changes in 2021:
Outside of everything already covered, other big 2021 Child Tax Credit changes include:
- The credit is now fully refundable, which means you get the credit even if owe zero tax.
- There is no earned income requirement.
Unless extended in future legislation, all changes are only in effect for 2021.
The New Child Tax Credit Portal and Next Steps
To receive the expanded credit monthly payments, families with children must file a 2020 tax return. The Child Tax Credit portal tool is now open for parents to update their information (e.g. income level, filing status, and/or number of children). Additionally, parents will be able to opt out of receiving the advance monthly credit payments. Stay tuned for more info and updates.