$300 in $100 bills

If your revenue goes up this yr, you could be eligible for much less of the child tax credit than initially estimated. 

Sarah Tew/CNET

The IRS is now sending the first batch of month-to-month funds of the child tax credit, with $15 billion going out this week to eligible households. The IRS bases your month-to-month fee quantity on your family’s 2019 or 2020 tax return. But what if you acquired greater than you certified for in your first fee. Do you want to pay back the child tax credit fee? Maybe. We’ll clarify.

The IRS used your latest tax return to set your fee. But there’s a lot that would change between tax seasons — as an example, you bought a pay improve or certainly one of your dependents is not eligible — that would end in your receiving more cash than you ought to have. One approach to forestall that from taking place is to take steps this yr to replace your family particulars utilizing an IRS portal

With so many shifting elements with the 2021 child tax credit, it could possibly get complicated quick, however the IRS has assets to assist you verify your eligibility, decide out of the month-to-month checks and extra. We’ll clarify how to estimate how a lot cash you’ll get, how you can put together now to keep away from having to pay the IRS later, and what non-tax-filing dad and mom ought to know about the credit so they will register for funds. You may also see if your household qualifies. This story was not too long ago up to date. 

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Child tax credit: Everything we know


Will I owe taxes in 2022 on my 2021 child tax credit cash?

The quick reply is not any, however you nonetheless want to know some monetary particulars. Child tax credit checks do not rely as revenue, so you will not have to pay revenue taxes on the funds, Mark Jaeger, vp of tax operations at TaxAct, instructed CNET. 

The IRS refers to these checks as “advance” funds forward of 2021 tax season. “That means you’re simply getting the payments sooner rather than waiting to receive that money when you file,” Jaeger mentioned. 

While you will not pay taxes in 2022 on the funds you obtain this yr, you nonetheless might have to repay the IRS some a part of the “advance” fee when you file your revenue tax return in 2022. 

Will I have to pay the IRS back for my child tax credit cash?

Maybe. Unless you unenroll from, or decide out of, the month-to-month child tax credit funds, you’ll robotically get half of your estimated quantity this yr from the IRS. Forgoing the month-to-month funds implies that as a substitute of receiving seven smaller installments — six in 2021 and one in 2022 — you will merely accumulate one massive fee when you file your tax return in 2022.

If for no matter motive you wind up getting extra child tax credit cash than you truly qualify for, you would possibly want to repay a few of the cash to the IRS subsequent yr. That could possibly be the case in the following eventualities:

  • If somebody in your family finally ends up getting a greater paying job this yr, rising your adjusted gross revenue and pushing you above or out of a earlier revenue bracket. 
  • If certainly one of your dependents ages out of an age bracket someday this yr. For instance, if your 5-year-old turns 6 in 2021, that might qualify you for a smaller fee. Or if your 17-year-old turns 18 in 2021, you would not be eligible for the month-to-month funds. 
  • If there’s a change in custody. Two examples: if dad and mom divorce and have a shared custody association, or if the father or mother with custody modifications from one yr to the subsequent. In a joint custody scenario, just one father or mother can declare the credit for a given child. 

Those sorts of modifications in circumstances are one main motive why the IRS is giving people the probability to decide out of the advance funds. 

To scale back the probability you obtain an overpayment this yr, later this summer time you’ll find a way to replace the IRS with your present household standing utilizing the child tax credit portal. (The replace classes for marital standing, dependents and revenue aren’t but obtainable, however they are going to be later.) You ought to proceed to hold the IRS up to date with household modifications via the finish of 2021.

Know that if the family’s adjusted gross revenue, or AGI, for 2021 is under a set revenue degree, you probably will not owe the IRS something, even when you acquired extra child tax credit cash than you technically ought to have. This is what the IRS calls “compensation safety” in order that lower-income households will not be on the hook to repay cash. Above a sure revenue degree, the quantity you want to repay will increase, or phases in, till you owe a full compensation.

A letter the IRS will ship you in January 2022 will assist you decide if you acquired an overpayment and if you want to repay all or a part of the advance funds. See under for extra on that letter.

Income caps for repaying child tax credit funds

Filing standing Qualify for full compensation safety Repayment safety phases out
Single filer Up to $40,000 Over $80,000
Filing as head of family Up to $50,000 Over $100,000
Married submitting a joint return Up to $60,000 Over $120,000

Will I would like to report funds once I file taxes in 2022?

Yes. In January 2022, the IRS will ship households that acquired child tax credit funds a letter with the complete amount of cash they bought in 2021. Hold on to this discover — which the IRS is asking Letter 6419 — you’ll want info from it when you file your 2021 tax return throughout subsequent yr’s tax season. (This isn’t the similar letter that the IRS is sending this yr about the funds.)

To be sure the IRS has your most up-to-date mailing handle, you’ll find a way to replace it via the Child Tax Credit Update Portal in coming months, the IRS mentioned. You may also change your handle via the Postal Service.


Child tax credit funds begin July 15 for 92% of U.S. households with kids. 

Sarah Tew/CNET

Could I qualify for extra child tax credit cash in 2022 after submitting taxes?

Yes. After you examine the info on the letter the IRS sends you in January 2022 with what you are eligible for, you could uncover you are due greater than you acquired prematurely funds, primarily based on your precise 2021 revenue. If that’s the case, you can declare the remaining quantity of your child tax credit when you file your return.

Will my child tax credit cash have an effect on different federal advantages I obtain?

According to the IRS, no. Because the advance child tax credit funds do not rely as revenue, federal, state or native businesses cannot use the quantity when figuring out if you or your household is eligible for different advantages or help.

For extra monetary advantages this yr, here is how to get monetary savings on child care prices and well being care bills.

The editorial content material on this web page relies solely on goal, unbiased assessments by our writers and isn’t influenced by promoting or partnerships. It has not been offered or commissioned by any third celebration. However, we could obtain compensation when you click on on hyperlinks to services or products provided by our companions.

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