Approximately two and a half months ago, advanced Child Tax Credit funds commenced deposit on the IRS’s estimate of who is deserved (The IRS is juggling a lot of balls right now!)
We have been in contact with folks who have never received a Child Tax Credit that are receiving the advance…. with the note above of how busy the IRS is, it may be a good idea to keep line of sight to these funds until you file your taxes, just in case you need to cough the advance back up at tax time in the form of a higher amount due!
IRS Statement of Child Tax Credit and Thresh Hold Levels of Qualifications
This is the best summary we could find, although a bit deep, here from the IRS :
A1. For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:
- $3,600 for children ages 5 and under at the end of 2021; and
- $3,000 for children ages 6 through 17 at the end of 2021.
Note: The $500 nonrefundable Credit for Other Dependents amount has not changed. For more information about the Credit for Other Dependents, see IRS Publication 972, Child Tax Credit and Credit for Other Dependents.
Q C2. Can my Child Tax Credit amount be reduced based on the amount of my 2021 income? (added June 14, 2021)
A2. Yes. The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI) in 2021.
The first phaseout can reduce the Child Tax Credit to $2,000 per child.
- That is, the first phaseout step can reduce only the $1,600 increase for qualifying children ages 5 and under, and the $1,000 increase for qualifying children ages 6 through 17, at the end of 2021.
The second phaseout can reduce the remaining Child Tax Credit below $2,000 per child.
For additional information on the amounts of modified AGI that reduce the 2021 Child Tax Credit, see Q C4 and Q C5, below.
A3. For purposes of the Child Tax Credit and advance Child Tax Credit payments, your modified AGI is your adjusted gross income (from the 2020 IRS Form 1040, line 11, or the 2019 IRS Form 1040, line 8b), plus the following amounts that may apply to you.
- Any amount on line 45 or line 50 of the 2020 or 2019 IRS Form 2555, Foreign Earned Income.
- Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.
If you do not have any of the above, your modified AGI is the same as your AGI.
Q C4. How does the first phaseout reduce the 2021 Child Tax Credit to $2,000 per child? (added June 14, 2021)
A4. The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:
- $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
- $112,500 if filing as head of household; or
- $75,000 if you are a single filer or are married and filing a separate return.
The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
Q C5. How does the second phaseout reduce the remaining $2,000 Child Tax Credit? (added June 14, 2021)
A5. The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:
- $400,000 if married and filing a joint return; or
- $200,000 for all other filing statuses.
The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
Have a Great ” Child Tax Credit Advance Payment Deep Dive” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth