Will the child tax credit payments you received affect your taxes? Here’s what you need to know

If you claimed the child tax credit for fewer dependents in 2021 than in 2020, this could result in an IRS overpayment.

Sarah Tew/CNET

Now that you have received your child tax credit letter and gathered all other important documents for declare your taxesyou may be worried about having to repay everything child tax credit money you received last year. Are you going to see a nasty surprise when you submit your tax return to the IRS due to prepayments?

Last year’s monthly payments were based on your 2019 or 2020 tax return. However, if your life circumstances have changed since your last return, this could have resulted in an overpayment. For example, if you received an income boost after filing your 2020 taxes or if your child is over the eligibility bracket. If so, you may owe the IRS money when an adjustment is made to your 2021 return.

This all sounds confusing, but the IRS has resources to help check your eligibility. You will also want to make sure that all details of your child tax credit letter are correct. This story was recently updated.

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Child tax credit: everything we know


Will I owe the IRS money for last year’s child tax credit checks?

The short answer is no, but you still need to know some financial details. Child tax credit checks don’t count as income, so you won’t have to pay tax on the payments, Mark Jaeger, vice president of tax operations at TaxAct, told CNET. The IRS called these checks “instalments” payments ahead of the 2021 tax season: “That means you just get the payments sooner rather than waiting to get that money when you file your return.”

Although you won’t pay taxes this year on payments you receive in 2021, you may still have to repay some of the deposit to the IRS when you file your tax return in 2022. will explain below.

Do I have to return the money if I received more than I was supposed to receive?

May be. Unless you chose to withdraw monthly child tax credit payments, you should have automatically received half of your estimated amount in 2021 from the IRS. Forgoing monthly payments means that instead of receiving smaller payments between July and December of last year, you’ll simply get your money back when you file your 2021 tax return.

If for some reason you end up receiving more Child Tax Credit money than you are actually entitled to due to outdated household details, you may have to repay some of the money to the IRS. This could be the case in the following scenarios:

  • If someone in your household got a better-paying job last year, that increases adjusted gross income and pushes you above or out of a previous income bracket.
  • If one of your elderly dependents of an age bracket last year. For example, if your 5-year-old turned 6 in 2021, that would entitle you to a lower payment. Or if your 17-year-old turned 18 in 2021, you would no longer be entitled to the amount you received.
  • If there’s a changing of the guard. Two examples: if the parents are divorced and have a shared custody arrangement, or if the parent with custody changes from year to year. In one shared custody situationonly one parent can claim the credit for a given child.
  • If your primary residence was in the United States for more than half of 2020, but not in 2021, you would no longer be eligible for payments.

These types of changed circumstances are a major reason the IRS has given people the option to opt out of prepayments.

What are the income limits for refunding child tax credit money?

If your household is adjusted gross incomeor AGI, for 2021 was below a set income level, you probably owe nothing to the IRS, even if you received more child tax credit money than you technically should have. This is what the IRS calls “refund protection” so that low-income families don’t have to repay money. Above a certain income level, the amount you must repay increases or scales until you owe full repayment.

The letter sent by the IRS between December 2021 and January 2022 can help you determine if you received an overpayment and whether you should repay all or part of the installments. See below for more information on this letter.

Income limits for refunding child tax credit payments

Filing status

Qualify for full refund protection

End of refund protection

Single registrant

Up to $40,000

Over $80,000

Declare head of family

Up to $50,000

Over $100,000

Married filing a joint return

Up to $60,000

Over $120,000

Do I have to report the total of my child tax credit payments on my tax return this year?

Yes. Between December 2021 and January, the IRS sent families who received child tax credit payments a letter with the total amount of money they received in 2021. Save this notice – that the IRS call letter 6419 – because you are going to need information when filing your 2021 tax return.

To ensure that the IRS has your most recent mailing address, you can update it using the Child Tax Credit Update Portal. You can also change your address by post.

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You will receive the rest of your Child Tax Credit money when you file your taxes this year.

Sarah Tew/CNET

Will the rest of my child tax credit arrive with my tax refund?

Yes. After comparing the information on the letter the IRS sent you with what you are entitled to, you may find that you owe more than you received in installments, based on your actual 2021 income. If so, you can claim the remaining amount of your Child Tax Credit when you file your return.

Does child tax credit money affect other federal benefit amounts I receive?

According to the IRS, no. Because child tax credit advance payments do not count as income, federal, state, or local agencies cannot use the amount to determine whether you or your family are eligible for other benefits or assistance.

For more financial benefits this year, here’s how to save money on childcare costs.

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