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Child Tax Credit 2021-2022: What You Need To Know To Qualify

Sarah Li Cain3-minute read
May 06, 2022

Tax credits are a dollar-for-dollar reduction of your tax liability. The child tax credit specifically is for taxpayers who have and support children, and the credits you receive could be significant depending on the age and number of children you have.

Let’s take a closer look at the Child Tax Credit, including its benefits and how you can qualify for it.

What Is The Child Tax Credit?

The child tax credit (CTC) is a fully refundable type of tax credit benefiting taxpayers and their dependents. A refundable tax credit means that if the reduction of your tax liability goes to below zero, you typically qualify for a tax return. This money is meant to help lessen the burden of taking care of your children.

Keep in mind that tax credits are different compared to tax deductions. The latter are items you can deduct from your taxable income that could lower the amount of taxes you owe, whereas a tax credit directly reduces the amount of tax you owe.

History Of The Child Tax Credit

The Child Tax Credit (CTC) was first enacted as part of the Taxpayer Relief Act of 1997, as a $500 nonrefundable credit.

Over the past several years, Congress has enacted different laws that have adjusted various features of and eligibility for the Child Tax Credit. Notably, the Economic Growth and Tax Relief Reconciliation Act of 2001, which raised the amount to $1,000, and the Emergency Economic Stabilization Act of 2008 that expanded the eligibility for the credit.

P.L. 115-97 in 2017 doubled the Child Tax Credit, increased the income eligibility and reduced the threshold for refundability. The American Rescue Plan Act of 2021 increased the child tax credit even more as an attempt to provide economic stimulus.

Child Tax Credit For 2022

The IRS deadline for the 2022 tax year is April 18, 2022 — you can file for the child tax credit when you submit your income tax return. Due to the American Rescue Plan Act of 2021, the credit increased from $2,000 per child to $3,600 for children under 6, and $3,000 for those aged 6 to 16. Taxpayers had the option of receiving the first half of the credit in 2021, and the rest when filing their annual tax return.

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Qualifying For The Child Tax Credit

In order to qualify for the Child Tax Credit, the following criteria must be met:

  • The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of the above (nephew, niece, grandchild, etc.)
  • The child must be 16 years or younger at the end of the tax year
  • You must claim the child as a dependent on your tax return, they must have lived with you at least half the year, and they must not have provided more than half of their own support
  • The child must be a U.S. citizen, U.S. national, or a U.S. resident alien

As your income increases, it can affect your eligibility for credits like the Child Tax Credit and change which federal income tax bracket you are in, If your modified adjusted gross income on your return is more than $200,000 ($400,000 if you file married filing joint), the amount of child tax credit you can claim will be reduced.

Child Tax Credit Portal And Payments Changes For 2022

If the American Rescue Plan Act isn’t extended for the 2022 tax year, then there will no longer be a monthly installment option in the latter half of 2021— checks will not be mailed nor payments received by direct deposit. Instead, the tax credit will be applied towards your tax returns in 2023.

Back in January 2022, the IRS should have sent you a Letter 6419, a document providing the total amount of advance child tax credit payments you received in 2021 — you’ll need this amount when filing taxes for the 2021 tax return.

To learn more, there is information available through the IRS’ child tax credit fact sheet. Plus, the child tax credit update portal is available for taxpayers to check eligibility, enroll or unenroll, view payments, view your bank account and mailing address information.

Child Tax Credit In 2020 Compared To 2021

The child tax credit is not the same in 2021 as it was in 2020 due to the American Rescue Plan. Most likely (unless the laws change), after 2021, the credit will return to the 2020 rules when you file in 2023.

The child tax credit for the 2020 tax year was $2,000 per qualifying child if you met the qualifications for the child tax credit listed above.

If you have children who are 17 or older, or other dependents, you may additionally be eligible for the Credit for Other Dependents, which is $500 per other dependent who does not qualify for the Child Tax Credit.

How To Opt Out Of The Child Tax Credit

If you had wanted to opt out of the advance tax child credit, you would need to go to the IRS website and do so through their online portal. Some people prefer to opt out for reasons such as being unsure of how much they could owe (perhaps due to an increased income in 2021) or wanting a larger tax refund all at once.

The Bottom Line

The child tax credit is a dollar-for-dollar reduction on your tax liability and eligibility depends on your income, whether you have a qualifying child, and claim them on your tax return. For more on how to take advantage of other tax credits and benefits, browse through the resources offered on the Rocket HQSM Learning Center for more information.

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Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.