The recently passed third stimulus relief package, known as the American Rescue Plan, greatly expanded the Child Tax Credit. Beginning with your tax year 2021 taxes (the ones filed in 2022), now you get additional CTC of the amount of $1000 ($1600 in some cases) to the already allowed $2000 of the child tax credit in the tax year 2021.
So, every eligible parent may receive a fully refundable $3,000 annual benefit per child ages 6 to 17 and $3,600 per child under 6. You can claim $500 for each child aged 18 and for full-time college students between the ages of 19 and 24.
Unlike year 2020 , this additional child tax credit for 2021 is fully refundable as per the American Rescue Plan Act. In year 2020 ,if taxpayers’ child tax credit exceeded the total tax liability for the year , then law allowed only up to $1,400 as a refund. Under the new rules for year 2021 , a taxpayer can receive the full $3,000 or $3,600 per child, depending on the child’s age.
No income, no problem! Contrary to earlier conditions set for 2020 that a person claiming child credit must have earned at least $2,500, the new child tax credit rule for 2021 allows households with no income to claim the CTC credit.
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2021 Child Tax Credit Calculator
When will you get Child Tax Credit refunds?
Once the credit amount is determined, 50% of it will be paid in advance with periodic payments. But those periodic payments will only run from July to December 2021. The remaining 50% will be claimed as a credit on the taxpayer’s 2021 tax return. IRS Commissioner Charles Rettig reportedly said in testimony before Congress that the IRS fully expects to launch the portal by July 1 as required under the law, with advance payments going out on a monthly basis to eligible families beginning in July.
Rules about Quantum of Child Tax Credit?
| Year 2020 | Year 2021 |
| 1. Basic CTC is $2,000 per qualifying child up-to age of 16 2.Basic CTC is $500 per qualifying child age of 17 & 18 and college student between 19-24 | 1.Basic CTC is $2,000 per qualifying child upto age of 17 2. Basic CTC is $500 per qualifying child age of 18 and college student between 19-24 3. Additional CTC of $1,600 for children upto age 6 years and CTC of $1000 for children upto 17 years of age |
What is the Child Tax Credit Phaseout Rule?
As the Modified Adjusted Gross Income (MAGI) exceeds following thresholds, the Child Tax Credit gets reduced the credit will be reduced by $50 for each $1,000:
| Filing Status | Threshold (2021 & 2020) |
| Head of household | 112500 |
| Married filing jointly | 150000 |
| Married filing seprately | 75000 |
| Qualifying widow or widower | 150000 |
| Single | 75000 |
How to Compute Refundable Child Tax Credit ?
The rules for year 2020 and 2021 are different. American Rescue Plan has made the rules for claiming refund in year 2021 far far better than rules of year 2020. Both are compared below:
| Year 2020 -CTC Refund Rules | Year 2021 -CTC Refund Rules |
| 1.You get to claim the lesser of 15% of your earned income above $2,500 or your unused Child Tax Credit amount, up to $1,400 per qualifying child aged upto 16 years. 2.You can claim $500 for each child aged 17 and 18, or for full-time college students between the ages of 19 and 24. | 1.You get a full refund of additional CTC ($3000 or $3600 per qualified child ) even if you don’t owe taxes. |
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