Millions of families started to receive financial relief in July 2021 from the expanded Child Tax Credit (CTC).
The new Child Tax Credit includes 3 significant changes:
- The credit increased from $2,000 per child in 2020 to $3,600 for each child under age 6. For each child ages 6 and up, it’s grown from $2,000 to $3,000.
- The new program makes 17-year-olds eligible for the $3,000 credit.
- The program also gets money to families sooner by sending out half of the 2021 Child Tax Credit in monthly payments.
What is the Child Tax Credit?
The child tax credit provides a financial benefit to Americans with children. For tax years before 2021, the IRS allowed a person with children to claim up to $2,000 per child up to age 16. In addition, the credit lowered the amount you owed in taxes, and a person could get a refund of up to $1,400 if they owed less than that amount. This new policy, part of The American Rescue Plan created by President Biden and Congress, is anticipated to cut child poverty nearly in half, help parents with caregiving costs, and promote positive childhood development.
9 Things to Know About the Expanded Child Tax Credit Program
1. You will not owe this money back (most likely)
Families earning between $40,000 – $60,000 will not have to repay the benefit (see details below).
Because the Child Tax Credit is paid out on an advanced basis, there is only a very small possibility that the IRS could pay someone too much if their family situation changes from 2020 to 2021, such as:
- A child moves out of the house and no longer lives with the caregiver for the required minimum six months
- Your income increases
- Your tax filing status changes
Low-income earners are protected by a safe harbor provision in the American Rescue Plan that kicks in if the IRS issues payment for a child who is no longer living in the household or otherwise no longer qualifies for the CTC. The protections are in place for families with incomes below $40,000 for single filers; $50,000 for head-of-household filers; and $60,000 for joint filers and phase out for families above these thresholds.
Situations that require paying back money include higher-earning families and overpayments due to income or marital status changes. For instance, suppose you anticipated your family income in 2021 to be significantly higher than your income in 2020, and you expect your 2021 income to be more than $150,000 (for joint filers) or $112,500 (for a head-of-household filer). In this scenario, you could consider opting out of monthly payments.
2. There is No Minimum Income Requirement
Even if a family has $0 in reported income and didn’t work during the previous year, they are eligible for the full credit if their children are within the age limits and have Social Security numbers.
Note: There is an upper-income limit of $150,000 for married couples and $112,500 for single parents filing as “head-of-household” to get the full $250 or $300 monthly CTC benefit. Once a family’s income goes above these thresholds, the CTC will begin to phase out.
3. Only children must have a Social Security number (SSN)
Children must have an SSN to be eligible for the CTC. Parents are not required to have an SSN, but they must have an Individual Taxpayer Identification Number (ITIN) to claim the CTC for their eligible children.
Taxpayers may claim the non-refundable “credit for other dependents” for dependents without an SSN who do not qualify for the CTC. Included are dependents over the age of 17, dependents who have ITINs, and other qualifying relatives (such as aging parents) living with and supported by the taxpayer. This credit reduces the taxes you owe by up to $500 per qualifying individual.
4. You can still get the CTC if you don’t file taxes
The IRS needs to know about you and your children to provide the advance CTC payments to you. If you filed a 2020 return by May 17, 2021, and qualify for the CTC based on the information in that return, the IRS will send you payments starting on July 15, 2021.
If you didn’t file your 2020 tax return, the IRS would use information from your 2019 return to determine your CTC eligibility. The IRS will also use information from the stimulus payment non-filer online portal you may have filled out to get your economic impact payment last year. If you use this portal and are eligible, you will get the CTC based on the information you submitted in the portal.
Couples making under $24,800 annually and heads-of-households under $18,650 can use the new IRS non-filer portal to claim the CTC. For the form, you will need:
- The full names and Social Security numbers (or ITINs for qualifying parents) for all adults and children in the household
- An email address to create an account
- A mailing address
- Banking information if you want to use direct deposit to get your payments. If you don’t have banking information, the IRS will send a check to the address provided for your CTC payment.
5. Which children are eligible for the CTC?
An estimated 90% of children in the US will automatically get the CTC. Even if a parent is making little to no income, they can still be eligible for the new CTC. Mixed-immigration-status families can also qualify for the CTC. If a child has a Social Security number and their parent(s) have an Individual Taxpayer Identification Number (ITIN), they can get the CTC if they meet the other income and eligibility requirements.
6. DACA (Deferred Action for Childhood Arrivals) recipients are eligible
Yes, qualifying residents, including DACA recipients, are eligible for the CTC as long as the children being claimed in the household have a valid SSN. In addition, DACA recipients who are dependents of ITIN filers can also be claimed for the CTC because they have valid SSNs.
7. Will my immigration status or my ability to get a green card be affected if I get the CTC?
No, receiving the CTC or other tax credits that you are eligible for will not affect your immigration status, your ability to get a green card, or your future immigration plans. Use of tax credits is not considered in a “public charge” determination by US Citizenship and Immigration Services.
8. If I get the CTC will it change my eligibility for other programs?
No. Getting the expanded CTC will not impact your eligibility for programs such as Medicaid, the Supplemental Nutrition Assistance Program (SNAP), or Supplemental Security Income (SSI).
9. Are there other refundable credits that I can get by filing taxes?
Filing taxes may allow you to claim other refundable credits, such as the Child and Dependent Care Credit for child care that allows you to work or the American Opportunity Tax Credit for tuition or fees for post-secondary education. In addition, taxpayers with low to moderate incomes who have SSNs and earned income can also qualify for the Earned Income Tax Credit (EITC).
The IRS has also set up a website to tell them if you don’t want to receive monthly payments and prefer to receive the full amount of the credit next year. In addition, you can use the website to view your advance payment schedule and determine your eligibility. You will also eventually use this website to report address or bank information changes after filing your taxes.
CWF can help make sure you get the CTC if you qualify—at no charge!
Taxes are confusing for most people. Don’t miss out on getting credits when you qualify. Working families and individuals in Southeastern Pennsylvania and Southern New Jersey earning less than $60,000 per year can get free professional help from an IRS-certified CWF tax preparer who will help you eliminate that stress. Get started with one of our IRS-certified tax professionals right away!