Will your child tax credit payments in 2021 affect your taxes next year? They could

If your income increases this year, you may be eligible for less of the child tax credit than originally planned.

Sarah Tew / CNET

The 2021 expanded child tax credit has changed compared to past years. For example, children under 6 are now entitled to $ 3,600 instead of the previous $ 2,000. And now, families will automatically get the first half of the credit in advance monthly payments from July through December (unless they choose to opt out and choose to receive the full credit when they file their taxes in 2022). But how will those monthly advance payments this year overall affect next year’s taxes?

The IRS bases your monthly payment amount on your household’s 2019 or 2020 income tax return. Of course, there are a lot of things that could change between tax seasons – for example, a raise in salary or a dependent aging out of an eligibility bracket – that could result in a debt to the IRS when an adjustment will be made next year. One way to prevent this from happening is to take action this year to update your household details online. You will soon be able to use a designated portal for the child tax credit do this.

With so many changes, it can quickly get confusing, but the IRS has resources to help check your eligibility, opt for monthly checks and more. We will explain how estimate how much money you will get, how you can prepare now to avoid having to pay the IRS later, and what non-filing parents should know about credit in order to they can sign up for payments. You can also see if your family is eligible before the start of payments on July 15. This story was recently updated.

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Child tax credit: everything we know


Do I have to pay taxes on my 2021 child tax credit money?

The short answer is no, but you still need some financial details. Child tax credit checks don’t count as income, so you won’t have to pay income tax on payments, Mark Jaeger, vice president of tax operations at Tax law, told CNET.

The IRS calls these checks “early” payments before the 2021 tax season. “That means you just receive the payments sooner rather than waiting to receive that money when you deposit,” Jaeger said.

Although you won’t pay taxes in 2022 on payments you receive this year, you may still have to repay part of the “early” payment to the IRS when you file your tax return in 2022.

Will I have to reimburse the IRS for my child tax credit money?

Perhaps. Unless you unsubscribe or unsubscribe monthly child tax credit payments, you will automatically get half of your estimated amount that year from the IRS. Forgoing monthly payments means that instead of receiving seven smaller payments – six in 2021 and one in 2022 – you will simply receive one large payment when you file your taxes in 2022.

If, for some reason, you get more child tax credit money than you are actually entitled to, you may need to return some of the money to the IRS next year. This could be the case in the following scenarios:

  • If someone in your household gets a higher paying job this year, increase your adjusted gross income and push yourself above or out of a previous income bracket.
  • If any of your dependents age of an age range this year. For example, if your 5-year-old turns 6 in 2021, that would entitle you to a smaller payment. Or if your 17-year-old turns 18 in 2021, you would no longer be eligible for monthly payments.
  • If there is a change of guard. Two examples: if the parents divorce and have a shared custody arrangement, or if the custodial parent changes from year to year. In one shared custody situation, only one parent can claim the credit for a given child.

These types of changes in circumstances are one of the main reasons the IRS gives people the option to opt out of advance payments.

To reduce the risk of receiving an overpayment this year, you will soon be able to update the IRS with your current marital status using the child tax credit portal. (The updated categories for marital status, dependents, and income are not yet available, but will be available later this summer.) You should continue to keep the IRS informed of family changes until. ‘at the end of 2021.

It is important to know that if the household is adjusted gross income, or AGI, for 2021 is below a defined income level, you probably won’t owe the IRS anything, 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 do not have to repay money. Above a certain level of income, the amount you have to repay increases, or gradually, until you owe money. ‘a full refund.

The letter the IRS sends you in January will help you determine if you received an overpayment and if you need to repay some or all of the prepayments.

Income limits for the repayment of child tax credit payments

Filing status

Qualify for full refund protection

Repayment protection is gradually disappearing

Sole depositor

Up to $ 40,000

Over $ 80,000

Deposit as head of household

Up to $ 50,000

Over $ 100,000

Married filing a joint return

Up to $ 60,000

Over $ 120,000

Will I need to report the payments when I file taxes in 2022?

Yes. In January 2022, the IRS will send families who received child tax credit payments a letter with the total amount of money they received in 2021. Keep this notice – what the IRS calls Letter 6419 – you will need it when you file your 2021 tax return during next year’s tax season. (It is not the same letter the IRS sends this year on payments.)

To make sure the IRS has your most recent mailing address, you can update it through the Child Tax Credit Update Portal in the coming months, the IRS said. You can also change address via postal service.


Child tax credit payments begin July 15 for 92% of U.S. families with children.

Sarah Tew / CNET

Could I be eligible for more child tax credit money in 2022 after I file taxes?

Yes. After comparing the information in the letter the IRS sends you in January 2022 with what you are entitled to, you may find that you owe more than what you received in advances, based on your actual income. from 2021. If so, you can claim the remaining amount your child tax credit when you file your return.

Will my child tax credit money affect other federal benefits 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 qualify for other benefits or assistance.

For more financial benefits this year, here’s how to save money on child care expenses and health expenditure.

The editorial content on this page is based solely on objective and independent reviews of our editors and is not influenced by advertising or partnerships. It was not supplied or ordered by a third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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