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Child tax credit: 2021 tax year

Attention all taxpayers with kids — this credit could lower your tax bill.

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Cassidy Horton
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The Child Tax Credit has changed in recent years thanks to the GOP tax reform bill. If you have a child, here’s everything you need to know about the Child Tax Credit.

What is the Child Tax Credit?

The Child Tax Credit is a federal tax credit that applies to families and taxpayers with children to reduce their taxes. It’s worth up to $3,600 per qualifying child under six and $3,000 for each child ages six through 17. The credit is fully refundable, meaning you may receive a refund if the credit reduces your tax bill to zero.

If you have a qualifying child that is 18 or is a full-time college student under 24, you can claim a reduced, nonrefundable credit worth up to $500.

How does the Child Tax Credit work?

Let’s look at a few examples to see how these credits work.

Drew owes $4,000 in taxes and has one child that’s five years old. He claims 100% of the Child Tax Credit and his tax bill is reduced to $400.

Lisa owes $5,000 in taxes and has one qualifying child who is 10 and one who is 20 but attends college full-time. She receives the $3,000 credit for her 10-year-old and the $500 credit for her 20-year-old, which reduces her tax bill to $1,500.

Reid doesn’t owe any taxes, but he has one qualifying child who is 17. He receives the entire Child Tax Credit as a refund. But if his child was 18, he wouldn’t receive a refund because he’d only qualify for the $500 nonrefundable credit.

How much is the Child Tax Credit worth for 2021 tax year?

For taxes due by the IRS’ extended April 18, 2022, deadline, you can claim the child tax credit if your modified adjusted gross income is:

Child Tax Credit 2021

Married filing jointly AGISingle AGIHead of household AGIChild Tax Credit amount
$150,000$75,000$112,500
  • $3,600 for children ages 5 and under
  • $3,000 for children ages 6 through 17

Child Tax Credit phaseouts

If your modified AGI exceeds the income limit to qualify for the full Child Tax Credit amount, the IRS has two phaseouts or income ranges that may qualify for a lower Child Tax Credit amount.

Married filing jointly MAGISingle MAGIHead of household MAGIChild Tax Credit amount
Phaseout 1$150,001-$400,000$75,001-$200,000$112,501-$200,000
  • $2,000 per child
Phaseout 2$400,000+$200,000+$200,000+
  • Deducts $50 for each $1,000 that exceeds your filing status’ income threshold

If you have a small tax bill or don’t owe any taxes at all, you can receive up to the full amount of the Child Tax Credit as a refund as long as you meet the minimum income requirement.

Limits

The Child Tax Credit has the following limitations:

  • Only one person can claim it. If you and a former spouse have joint custody, you’ll have to mutually agree who gets to claim the credit.
  • Not a state credit. The Child Tax Credit is a federal credit only, so you can’t claim it on your state tax return.

How has the Child Tax Credit changed?

Prior to 2018, the Child Tax Credit was a $1,000 nonrefundable credit. Thanks to a change in tax legislation in 2018, the credit doubled to $2,000 and the modified adjusted gross income (MAGI) limits increased. But the American Rescue Plan Act of 2021 changed a lot for the 2021 tax year.

The credit has increased and includes two phaseouts that reduce the amount per child based on your MAGI. And unlike previous years that had a limit to how much of the credit was refundable, the entire Child Tax Credit is refundable in 2021. That means you could get up to the full amount as a tax refund.

And for the 2021 tax year, the Child Tax Credit includes 17-year-old dependents.

Child Tax CreditMAGI limit for married filing jointlyMAGI limit for single, head of household, qualifying widow(er)
2020$2,000Up to $400,000Up to $200,000
2019$2,000Up to $400,000Up to $200,000
2018$2,000Up to $400,000Up to $200,000
2017$1,000Up to $110,000Up to $75,000
2016$1,000Up to $110,000Up to $75,000

Who qualifies for the Child Tax Credit?

You may qualify for the $3,600 or $3,000 Child Tax Credit if you’re caring for any family-related dependents younger than 17. Or you’ll qualify for the $500 credit for any family-related dependents ages 18 or 19- to 24-year-old full-time college students. This includes grandchildren, nieces, nephews, adopted children and foster children.

A child must meet the following eligibility requirements for the credit:

  • A US citizen, national or resident alien with a valid Social Security number
  • Spend at least 50% of the tax year living with the person filing the credit
  • Qualifies as a dependent on the person’s tax return
Taxpayers can qualify for the Child Tax Credit as long as they:

  • Provide at least 50% of the child’s financial support
  • Have a MAGI under $150,000 for married filing jointly or $112,500 for all other filing statuses

How to calculate the Child Tax Credit

Select the income situation that applies to you to see step-by-step instructions for calculating your credit.

Modified adjusted gross income is below $112,500 or $150,000 if married filing jointly

Follow these steps to calculate the Child Tax Credit if your modified adjusted gross income is below $112,500 or $150,000 if you’re married and filing jointly:

  1. Take the total number of dependents in your household under age six and multiply it by $3,600.
  2. Take the total number of dependents in your household ages six to 17 and multiply it by $3,000.
  3. Take the total number of dependents in your household who are 18 or 19 to 24 but enrolled in college full-time and multiply it by $500.
  4. Add up the total amounts from steps 1 to 3 to get your total Child Tax Credit amount.

Modified adjusted gross income is below $200,000 or $400,000 if married filing jointly

Follow these steps to calculate the Child Tax Credit if your modified adjusted gross income is below $112,500 or $150,000 if you’re married and filing jointly:

  1. Take the total number of dependents in your household under age 18 and multiply it by $2,000.
  2. Take the total number of dependents in your household who are 18 or 19 to 24 but enrolled in college full-time and multiply it by $500.
  3. Add up the total amounts from steps 1 and 2 to get your total Child Tax Credit amount.

Modified adjusted gross income exceeds $200,000 or $400,000 if married filing jointly

If your modified adjusted gross income exceeds $200,000 or $400,000 if you’re married and filing jointly, your credit amount is reduced by $50 for each $1,000 of income that puts you over the limit. Follow these steps to calculate your reduced credit:

  1. Subtract your Child Tax Credit threshold from your modified adjusted gross income.
  2. Divide $1,000 by the amount in Step 1.
  3. Multiply the amount in Step 2 by $50. This number tells you how much your credit will be reduced.
  4. Take the total number of dependents in your household under age 18 and multiply it by $2,000.
  5. Take the total number of dependents in your household who are 18 or 19 to 24 but enrolled in college full-time and multiply it by $500.
  6. Add up the total amounts from Step 4 and 5 to get your tentative Child Tax Credit amount.
  7. Subtract the number in Step 3 from the number in Step 6 to get your total Child Tax Credit amount.

    However, if you file your tax return with a tax professional or preparation software, they can calculate the Child Tax Credit amount for you as long as you meet the income requirements and your child qualifies for the credit.

    Only one taxpayer can claim a qualifying child. If you’re divorced and you and your ex-spouse provide equal support to your child, you need to mutually agree on who gets to claim the credit each year.

    What to watch out for

    If you qualify for the Child Tax Credit, the current rates apply for the tax year 2021. The credit will likely change after this time.

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    There are two other child-related tax credits you can use to reduce your tax bill. There’s the Child and Dependent Care Tax Credit and the Earned Income Tax Credit.

    The Child and Dependent Care Tax Credit

    If you work and are paying for professional care for a child younger than 13 or an incapacitated spouse or a parent, you may qualify for the Child and Dependent Care Tax Credit.

    The Earned Income Tax Credit

    This refundable tax credit was designed to help low-income families. If you qualify, you could earn up to $6,728 depending on your income, filing status and number of children.

    Bottom line

    If you have qualifying dependents, the Child Tax Credit could reduce your tax bill. Claim up to $3,600 for each qualifying child and $500 for other qualifying dependents. But keep in mind that only one taxpayer can claim the Child Tax Credit and there are qualification limitations.

    Most tax preparation software packages calculate your Child Tax Credit for you. Before you file your taxes, consider hiring a professional or shopping around for an online service to help you file your tax return.

    Frequently asked questions

    What is the advanced Child Tax Credit?
    The advanced Child Tax Credit is an advance monthly payment of half the total Child Tax Credit amount beginning July 15, 2021.

    Can I file for the Child Tax Credit if I’m unemployed?
    Yes. You don’t need to have any income to claim this credit.

    How do I get the $3,000 Child Tax Credit for my 18-year-old?
    Your child must be 17 or younger to qualify for the Child Tax Credit. However, you can still claim a nonrefundable credit up to $500.

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