Build Back Better’s Child Tax Credit Changes

President Biden’s American Rescue Plan made changes to the Child Tax Credit for 2021. It increased to as much as $3,000 per child ($3,600 for ages 5 and under). The age limit for qualifying children also rose to 17 (from 16).17 The maximum refundable portion of the child credit for each child under age 17 was limited to $1,400 per child. Now, the credit is fully refundable for that amount in 2021. The amount for 2022 is $1,500.1819

The IRS may also issue up to half of an eligible household’s credit as an advance disbursement between July and December, using the previous year’s tax return to determine eligibility.20

Eligible families who did not receive any advance Child Tax Credit payments can claim the full amount of the Child Tax Credit on their 2021 federal tax return. Families who received advance payments will need to file a 2021 tax return and compare the advance Child Tax Credit payments they received in 2021 with the amount of the Child Tax Credit they can properly claim on their 2021 tax return.21

The credit is reduced to $2,000 per child if your modified adjusted gross income (MAGI) exceeds a certain limit. The limit for 2021 is:

  • $150,000 for married couples filing jointly
  • $112,500 for heads of household
  • $75,000 for single filers22

President Biden’s bill also eliminated the minimum income requirement for the Child Tax Credit.20 Previously, families earning less than $2,500 a year were ineligible and credits were calculated based on distance from that minimum at a rate of 15 cents per child for every dollar of income above $2,500.23

This expansion of the Child Tax Credit and the monthly advance payments only apply to 2021. There is an option to receive credit as a lump sum by opting out on the IRS Child Tax Credit Update Portal. That money will come at one time when 2022 taxes are filed in the spring of 2023.24

The child tax credit for tax years 2022 and onward will revert back to pre-2021 rules.

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