Filing Taxes? The Child Tax Credit Can Save You Thousands

The child tax credit, often known as the “Kiddie Credit,” is a federal government benefit to assist eligible parents with qualifying dependent children in the United States. It was first issued in 1997 and has been greatly expanded as part of the 2021 American Rescue Plan. 

Whether you are wondering how much you could get back or if you even qualify for the credit, keep reading! This article will answer all of your questions about the child tax credit, including the qualifying criteria, maximum credit amounts, and how to claim it on your taxes.

What Is the Child Tax Credit?

The child tax credit is a tax break available to parents in the United States. It's a credit rather than a deduction because it reduces taxes paid, not taxable income. The child tax credit can be worth up to $3600 per child for 2021 taxes, a significant amount of money you can receive every year to increase your family's net worth.

How Much Can I Get for the Child Tax Credit?

If you are filing your 2021 taxes now, you are in luck. President Biden's American Rescue Plan raised the credit amount for 2021. The government boosted the Child Tax Credit from $2,000 to $3,600 for qualifying children under the age of six and $3,000 for other qualifying children under 18. Previously, only children 16 and younger qualified for the child tax credit.

The credit is also fully refundable, so eligible households can receive the full credit benefit, even if no taxes are outstanding. In 2022, the child tax credit will revert to $2,000 for each dependent child aged 17 or younger. This amount may change depending on what Congress decides in the coming weeks. If they do not pass an extension of the enhanced benefit or the monthly payments, the credit will return to its original amount of $2000.

Do I Qualify for the Child Tax Credit?

To qualify for the 2021 child tax credit:  

  • You must have a child under the age of 18 before January 1, 2022
  • The child must be a US citizen or resident alien 
  • You must also provide proof of your child's identity
  • The child must have a social security number 
  • In addition, your child must live with you for more than half of the year
  • You or your spouse must live in the United States for at least half of the year 

You can claim the credit for your child, adopted child, stepchild, or foster child. You can also claim the credit for a sibling as long as they are dependent on you for at least half of their expenses.

Besides the eligibility factors above, your annual income must be less than or equal to:

  • $150,000 if you are married and filing a joint return
  • $112,500 if you are a single parent
  • $75,000 for a single filer (even if you are married and filing a separate return)

Parents and guardians with higher incomes may still receive a partial payment.

Once you are over $200,000 as a single filer or $400,000 as a joint filer, you will no longer qualify for the Child Tax Credit. However, the actual amount of the credit will depend on your income and filing status. Above these income amounts, the credit is reduced by $50 for each $1,000 over these limits. A full list of eligibility criteria is available here

How Do I Get My 2021 Child Tax Credit Payments?

The American Rescue Plan made it easier to receive qualifying payments for 2021. Payments were sent monthly between July to December of 2021. If you are eligible, you may have already received half the estimated amount of your Child Tax Credit for 2021. Now that tax season is upon us, you will receive the other half when you file your taxes for 2021.

If you are eligible but have not received your monthly payments, you can check the status by logging into the IRS portal or contacting the IRS helpline at 800-908-4184. 

What Is the Impact of the Child Tax Credit on My Taxes?

The child tax credit can have a significant impact on your taxes. If you are eligible for the child tax credit, it may reduce your overall tax bill by up to $3600 per child. In addition, you can use the child tax credit to offset your income taxes. For example, if you owe $4000 in income taxes, the child tax credit could reduce your tax bill to $400. You can then save your refund or use it to invest and grow your wealth. 

You do not have to pay back the child tax credit. Even if you owe no income taxes, you can claim the child tax credit. The child tax credit is a refundable credit, which means that if you qualify for the credit, you will receive a refund for any unused portion of the credit.

How Do I Claim the Child Tax Credit?

You can claim child tax credits on your taxes and get a refund for your eligible amount, even if you do not owe any taxes. As per the IRS website, “you can claim the Child Tax Credit by entering your children and other dependents on Form 1040, US Individual Income Tax Return, and attaching a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.” 

If you received advance monthly Child Tax Credit payments in 2021, you would need to subtract the received amount from the total eligible amount to claim the balance of your payment on your tax return. The IRS mailed out Letter 6419 in January 2022 to advise you of the exact amount disbursed to you already in 2021. 

What If I Do Not Qualify for the Child Tax Credit? 

If you do not qualify for the child tax credit, other child and family-related tax benefits may be available. These include the child and dependent care credit, the earned income tax credit, and the adoption tax credit. You can learn more about these credits here

If you work and live outside of the United States, you can still claim the Child Tax Credit unless you have also claimed the foreign earned income exclusion. You can find more information for international taxpayers here. We also encourage you to engage a knowledgeable tax advisor to guide you. 

Conclusion

The child tax credit can be a great way to reduce your overall tax bill and get some extra money back. However, knowing the eligibility requirements and how the credit works are vital before filing your taxes. If you have any questions, check with a tax professional to ensure that you get the most out of your child tax credit. Thanks for reading! We hope that this article makes your tax filing a little easier this year. 


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Ash & Pri are the Founders of AshandPri.com where they empower others to make smart money decisions across all aspects of life. They achieved financial freedom in their 30's and have traveled to over 30 countries, thanks to a disciplined approach to money management. Both hold an MBA degree and have 13+ years of experience in financial services, consulting, and telecommunications.