The Child Tax Credit can significantly reduce your tax bill if you meet all seven requirements: 1. age, 2. relationship, 3. support, 4. dependent status, 5. citizenship, 6. length of residency and 7. family income. You and/or your child must pass all seven to claim this tax credit. Use our child tax credit calculator to determine your eligibility for tax year 2020 or tax year 2021.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
The American Rescue Plan Act of March 2021 is designed to assist in the United States’ recovery from the economic impact of the COVID-19 pandemic. A significant part of the plan includes the broadening of the Child Tax Credit to include more families, increase the financial benefits the credit provides, and to get these benefits into the hands of the eligible taxpayers quickly through the use of Advanced Monthly Payments in 2021.
Use the updated Child Tax Credit Calculator to determine and calculate your 2021 or 2020 Child Tax Credit eligibility and determine how much you should receive in 2021 Advanced Monthly Payments.
Jump to the Child Tax Credit details and requirements for different years:
- Advanced Monthly Payments: Select 2021 for Year of tax return, enter in your 2020 tax information, and check the box "To understand your advance, enter your 2020 tax information and check this box."
- 2021 Child Tax Credit: Select 2021 for year of tax return and enter your 2021 information.
- 2020 Child Tax Credit: Select 2020 for year of tax return and enter your 2020 information.
Child Tax Credit
- Most people will receive about half of the Child Tax Credit as advanced monthly payments and the other half when they file their taxes in 2022. This could make your 2022 refund look smaller than what you typically receive.
- There are certain situations where you might want to consider opting out of these payments to avoid needing to pay back these monthly payments on your 2021 tax return. You can find more information on these situations, here.
2021 Child Tax Credit
Advance Child Tax Credit Payments
The expanded and newly-advanceable Child Tax Credit for 2021 was authorized by the American Rescue Plan Act, enacted in March of 2021. Part of this expansion is to advance a portion of the 2021 tax credit to families by sending them direct payments during 2021 rather than having them wait until they prepare their 2021 taxes in 2022.
Most families do not need to do anything to get their advance payment. Normally, the IRS will calculate the payment amount based on your 2020 tax return. Eligible families will receive advance payments, either by direct deposit or check.
These payments are an advance of your 2021 Child Tax Credit. The amount that you receive will be reconciled to the amount that you are eligible for when you prepare your 2021 tax return in 2022. Most families will receive about one-half of their tax credit through the advance payments. If you receive too little, you will be due an additional amount on your tax return. In the unlikely event that you receive too much, you might have to pay the excess back, depending on your income level.
Child Tax Credit Changes
The American Rescue Plan raised the maximum Child Tax Credit in 2021 to $3,600 per child for qualifying children under the age of 6 and to $3,000 per child for qualifying children ages 6 through 17. Before 2021, the credit was worth up to $2,000 per eligible child, and children 17 years and older were not eligible for the credit.
The Child Tax Credit changes for 2021 have lower income limits than the original Child Tax Credit. Families that do not qualify for the credit using these lower income limits are still eligible for the $2,000 per child credit using the original Child Tax Credit income and phase-out amounts.
In addition, the entire credit is fully refundable for 2021. This means that eligible families can get it, even if they owe no federal income tax.
Before this year, the refundable portion was limited to $1,400 per child and there were other requirements regarding earned income to obtain the refundable portion. There is not an earned income requirement for 2021.
To claim the Child Tax Credit, you must determine if your child is eligible. There are seven qualifying tests to consider: age, relationship, support, dependent status, citizenship, length of residency and family income. You and/or your child must pass all seven to claim this tax credit.
Top 7 Requirements for the 2021 Child Tax Credit:
1) Age test - To qualify, a child must have been under age 18 at the end of the year. Increased credit amounts are available for children under age 6 if certain family income tests are met.
2) Relationship test - The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency. An adopted child is always treated as your own child. ("An adopted child" includes a child lawfully placed with you for legal adoption, even if that adoption is not final by the end of the tax year.) You can also claim your brother or sister, stepbrother, stepsister. And you can claim descendants of any of these qualifying people—such as your nieces, nephews and grandchildren—if they meet all the other tests.
3) Support test - To qualify, the child cannot have provided more than half of his or her own financial support during the tax year.
4) Dependent test - You must claim the child as a dependent on your tax return. Bear in mind that in order for you to claim a child as a dependent, he or she must:
- be your child (or adoptive or foster child), sibling, niece, nephew or grandchild;
- be under age 19, or under age 24 and a full-time student for at least five months of the year; or be permanently disabled, regardless of age;
- have lived with you for more than half the year; and
- have provided no more than half his or her own support for the year.
5) Citizenship test - The child must be a U.S. citizen, a U.S. national or a U.S. resident alien. (For tax purposes, the term "U.S. national" refers to individuals who were born in American Samoa or in the Commonwealth of the Northern Mariana Islands.)
6) Residence test - The child must have lived with you for more than half of the tax year for which you claim the credit. There are important exceptions, however:
- A child who was born (or died) during the tax year is considered to have lived with you for the entire year.
- Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military services or detention in a juvenile facility, are counted as time the child lived with you.
- There are also some exceptions to the residency test for children of divorced or separated parents. For details, see the instructions for Form 1040.
7) Family income test
Income Limitation on the 2021 Child Tax Credit
The 2021 Child Tax Credit is reduced if your 2021 modified adjusted gross income (MAGI) is above certain amounts which are determined by your tax-filing status.
- Qualifying families with incomes less than $75,000 for single, $112,500 for head of household, or $150,000 for joint returns are eligible for the temporarily increased credit of $3,600 for children under 6 and $3,000 for children under 18. Above these income amounts, the credit is reduced by $50 for each $1,000 over these limits.
- For families with MAGI greater than the amounts eligible for the increased credit, the phaseout of the credit begins with $200,000 in income ($400,000 for married filing jointly) and the credit amount is $2,000 for all children under 18 at the end of the tax year.
- Your greatest available credit is based on the above method that provides you with the largest benefit.
What if the credit exceeds my tax liability?
For 2021, the Child Tax Credit is fully refundable; if your credit exceeds your tax liability, your tax bill is reduced to zero and any remaining unused credit can be provided to you as a refund.
Other Dependent Tax Credit
If you have a dependent that doesn't meet the requirements of the 2021 Child Tax Credit, you might be able to claim them as a dependent and qualify for the Other Dependent Tax Credit.
For updates and more information, please visit our 2021 Child Tax Credit blog post.
2020 and earlier Child Tax Credit
To claim the Child Tax Credit for the 2020 and earlier tax years, you must determine if your child is eligible. All of the seven qualifying tests listed above for the 2021 credit are the same except for:
Age test - For the 2020 tax credit, a child must have been under age 17 (i.e., 16 years old or younger) at the end of the tax year for which you claim the credit.
Family income test - For 2020 and earlier years, the Child Tax Credit is reduced if your modified adjusted gross income (MAGI) is above certain amounts, which are determined by your tax-filing status:
- For tax years from 2018 through 2020, the phaseout of the credit begins with $200,000 in income ($400,000 for married filing jointly).
- In 2017, the phase out threshold is $55,000 for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly. For each $1,000 of income above the threshold, your available child tax credit is reduced by $50.
What if the credit exceeds my 2020 tax liability?
For 2020 and earlier tax years, the Child Tax Credit is nonrefundable; if your credit exceeds your tax liability, your tax bill is reduced to zero and any remaining unused credit is lost. However, you may be able to claim a refundable Additional Child Tax Credit for the unused balance.
- Up to $1,400 per qualifying child is refundable with the Additional Child Tax Credit.
- You can find out if you're eligible for this refundable credit by completing the worksheet in IRS Form 8812.
Other Dependent Tax Credit
If you have a dependent that doesn't meet the requirements of the Child Tax Credit or the Additional Child Tax Credit, you might be able to claim them as a dependent and qualify for the Other Dependent Tax Credit.
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