The Child Tax Credit (CTC) can reduce the amount of taxes you owe depending on your income. Read more to learn who qualifies for the credit, how to reduce your taxes and increase your refund, and how this credit has changed for the 2020 and 2021 tax years.
Coronavirus (COVID-19) changes
The new American Rescue Plan Act, signed on March 11, temporarily increases the Child Tax Credit for the 2021 tax year.
- In 2021, the credit is increased from $2,000 to $3,000 for each child six years and older, and to $3,600 for each child five years and younger.
- Children up to 17 years old are eligible. The prior maximum age was 16.
- Half of this credit can be paid to you in advance through monthly payments starting in July and ending in December 2021. The payments will be made on the 15th of each month. You will be able to claim the other half on your tax return next year.
- You must file your 2020 taxes to receive the advance payments. You may qualify for free tax help.
- If you are not required to file taxes, you can use the IRS Non-filer Sign-Up Tool to file a basic return to get the advance payments.
For the 2020 tax year, if you earned more income in 2019 than you did in 2020, you can use your 2019 income to calculate your Additional Child Tax Credit (ACTC) for your 2020 tax return. This can be helpful because families must have a minimum of $2,500 of earned income to claim the ACTC.
For the 2021 tax year, the earned income minimum of $2,500 does not apply to the Child Tax Credit. Even if you did not have earned income, you should file your 2020 taxes to receive the advance Child Tax Credit payments.
The IRS has launched two online tools to help taxpayers navigate the 2021 credit. The new Child Tax Credit Eligibility Assistant allows families to answer a series of questions to quickly determine whether they qualify for the advance credit. The Child Tax Credit Update Portal allows families to verify their eligibility for the payments, update their bank account information and if they choose to, unenroll or opt out from receiving the monthly payments so they can receive a lump sum when they file their tax return next year.
More tools are planned for the Update Portal. In August, families will be able to update their mailing address.
What is the Child Tax Credit?
The Child Tax Credit provides up to a $2,000 reduction in your tax bill for each of your qualifying children under 17 years old.
Your Child Tax Credit amount will be lower than $2,000 per qualifying child if you:
- Have high income. If you are a married taxpayer filing taxes jointly, your maximum child tax credit is reduced if your adjust gross income is higher than $400,000. All other taxpayers are eligible for reduced child tax credits if their income is higher than $200,000.
- Owe zero taxes. If you do not owe any taxes, you can get a refund through the Additional Child Tax Credit (ACTC), but the maximum amount that can be refunded is $1,400 per qualifying child.
- Owe an alternative minimum tax amount. The child tax credit is limited by any alternative minimum tax (AMT) you owe. AMT is generally applicable to higher income individuals.
Qualifying for the Child Tax Credit
To be eligible for the Child Tax Credit, you must have a “qualifying child” under 17 years old. A “qualifying child” must meet all of these requirements:
- Age. The child must be 16 years or younger at the end of last tax year.
- Relationship. The child must be either your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendent of any of these people (like your grandchild, niece or nephew). An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support. The child must provide less than half of their own support.
- Dependent. You must claim the child as a dependent on your federal tax return.
- Citizenship. The child must be a U.S. citizen, U.S. national or U.S. resident alien. The qualifying child must have a Social Security number issued by the Social Security Administration before the due date of their tax return (including extensions).
- Residence. The child must live with you for more than half of the tax year. There are some exceptions to the residence requirement. For information about exceptions, read the IRS Publication 972, Child Tax Credit.
If your dependent is over 16 years old or does not have a Social Security number, you may be eligible for another type of credit for dependents.
To determine your child’s eligibility for the child tax credit or for other credits for dependents, use the IRS’s tool.
Claiming the Additional Child Tax Credit Refund
If your available Child Tax Credit is greater than the total amount of your tax bill, you can claim the Additional Child Tax Credit (ACTC) to get up to $1,400 of your remaining Child Tax Credit as a refund.
To be eligible for the ACTC, your earned income must be at least $2,500. You can get the ACTC as a refund even if you owe no taxes. The maximum amount of ACTC that can be refunded is $1,400 per qualifying child.
You have to file a tax return to get this refund. After the Child Tax Credit eliminates any taxes you owe, you can claim the ACTC as a refund by submitting Schedule 8812 with your tax return.
If the IRS denies your Child Tax Credit claim
If you think you qualify for the Child Tax Credit and the IRS denies your claim, contact your local legal aid. They might be able to help you appeal your claim.
Most people with low or moderate income can do their taxes for free using FreeFile’s brand name software or fillable forms.
To do your taxes for free:
- Visit IRS.gov/freefile. It’s available 24/7.
- Choose an option. Use the “help me” tool to find a good match.
- Click “Leave IRS Site.” On an IRS partner’s website, begin your return safely and securely.
Also, you may qualify for free tax help from:
- VITA. If you have low income, disability or limited English skills, you may qualify for free tax help from the Volunteer Income Tax Assistance (VITA) program.
- TCE. If you are at least 60 years old, you can receive free tax help from Tax Counseling for the Elderly (TCE).
Due to COVID-19, a number of VITA sites and TCE sites are closed. To find the nearest open VITA site near you, use the the VITA locator tool or call (800) 906-9887. Some VITA sites are offering help remotely, online or over the phone. Please check with your local VITA site to see if they have a remote option available.