You may qualify for the Child Tax Credit, which is a tax credit for your dependent children that is better than a tax deduction since it lowers your taxes dollar-for-dollar.
Table of Contents
- 1 How Much is the Child Tax Credit for 2021, 2022?
- 2 What is Child Tax Credit?
- 3 Who is Eligible for Child Tax Credit?
- 4 I Just Had a Baby. Am I Eligible for the CTC?
- 5 I’m Divorced and Share Custody of my Child. Am I Eligible for the CTC?
- 6 What is the Other Dependent Tax Credit?
- 7 How to File Taxes Online in 3 Simple Steps With TurboTax
How Much is the Child Tax Credit for 2021, 2022?
The Child Tax Credit under the American Rescue Plan rose from $2,000 to $3,000 for every qualified child over the age of six, and from $2,000 to $3,600 for each qualifying child under the age of six, beginning in tax year 2021 (the taxes you file in 2022).
Families with 17-year-old children will be eligible to claim the Child Tax Credit for the first time under the new rule. If your income is less than $150,000 for married couples filing jointly, $75,000 for singles, or $112,500 if you are the head of household, you will be eligible for the entire credit.
Families that earn more than the modified adjusted gross income listed above and are not qualified for the extended $3,000 or $3,600 credit may still be able to claim the Child Tax Credit for each qualifying child under 17 up to $2,000 under the current tax policy.
Individuals earning up to $200,000 or married couples filing jointly earning up to $400,000. may still take advantage of this credit amount.
What is Child Tax Credit?
For each qualified child under the age of 17, the Child Tax Credit program may lower your federal tax liability by thousands of dollars.
- Beginning in summer 2021, significant improvements to the Child Tax Benefit will allow many families to receive early monthly payments of the credit.
- Beginning July 15, 2021, the Internal Revenue Service (IRS) will pay half of the entire credit amount in advance monthly payments.
When you submit your 2021 income tax return, you’ll be able to claim the other half. Only the tax year 2021 is affected by these changes.
Who is Eligible for Child Tax Credit?
To claim the Child Tax Credit the child must be under the age of 17 to be eligible for this federal program.
A qualified child must be a son, daughter, foster child, brother, sister, stepbrother, stepsister, or descendant of any of these individuals (for example, your grandchild, niece, or nephew).
Adopted children who have been legally placed with you for adoption are also eligible.
Eligible families may get a $300 monthly advance payment of their 2021 Child Tax Credit for each child under the age of six, and a $250 monthly advance payment for each child aged six and older.
These payments may be made in advance and reflect a portion of the tax year 2021 Child Tax Credit, rather than receiving this credit as part of your return in 2022.
I Just Had a Baby. Am I Eligible for the CTC?
In a nutshell, sure. The child tax credit is available to parents of infants in 2021. The hitch is that you must notify the IRS.
Because the government department does not have information for your baby on file, you will need to use the CTC portal to update your number of qualified children.
Don’t worry if you decide not to participate in the upfront payments. When you submit your 2021 tax return, you may still claim the credit.
Only one individual may claim the Child Tax Credit (CTC) and get advance payments in 2021. The person who stays with the child for more than half the year is eligible to claim the credit. Even if you are divorced and have joint custody of your child, the CTC cannot be divided or shared.
What is the Other Dependent Tax Credit?
If you don’t qualify for the Child Tax Credit and your dependent child is beyond the age of 17, or you assist a friend or family, you may be eligible to claim the Other Dependent Tax Credit of up to $500 per qualified individual.
If your adjusted gross income exceeds $200,000 (or $400,000 for married filing joint returns), the credit will begin to taper down.