Changes To The Child Tax Credit For 2021

Before President Biden signed the American Rescue Plan Act of 2021, the child tax credit was $2,000 for each qualifying child under the age of 17, with a maximum of $1,400 per child being allowed to be refunded based on AGI limitations.  

However, for tax year 2021 only, the new Stimulus Bill is increasing the child tax credit from $2,000 per child to $3,000 per child for children between the ages of 6 and 17 which means that children 17 years of age are now eligible.

The Bill also increases the child tax credit from $2,000 per child to $3.600 per child under the age of 6 and is fully refundable.

For example, if you have a child who turns 4 in 2021, a child who turns 6 in 2021, and a child who turns 17 in 2021 – your 2021 child tax credit is $9,600 ($3,600 plus $3,000 plus $3,000) and is fully refundable.

For the base or “old” $2,000 portion of the “new” tax credit, the old income limitations apply – $200,000 of AGI for singles and head of household, $400,000 of AGI for married filing joint.  If your AGI is below those amounts, you get the full $2,000 base or “old” portion of the credit per child.

The income limitations for the “new” portion (ie, the $1,000 additional amount for children between the ages of 6 and 17; the $1,600 additional amount for children under the age of 6) are similar to those for the first two rounds of stimulus checks.  Therefore, if you are single and your AGI is $75,000 or less, you are head of household and your AGI is $112,500 or less, or you are married filing joint and your AGI is $150,000 or less, there are no phase-outs of the child tax credit.

If you are above those AGI limitations for the “new” portion of the child tax credit, there is a phase-out of 5 cents for every dollar you are above the AGI limitation. 

After doubts about whether it was up to the task, the IRS says it’s on schedule to start sending monthly child tax credit payments this summer.  The IRS will base eligibility for the credit and advance payments, and calculate the amount of the advance payment, based on previously filed tax returns. It will first look at the taxpayer’s 2020 return, and if a 2020 return has not yet been filed, the IRS will look at the 2019 return. The advance payments will account for half of a family’s 2021 child tax credit.