Child Tax Credit Frequently Asked Questions

There are a lot of questions about the 2021 Child Tax Credit. In 2022, Child Tax Credit is one of several tax issues creating anxiety for people filing their individual tax returns. There has been so much confusion that the IRS has created a Child Tax Credit FAQ.

Here we’ll pick a few of these frequently asked questions and try to provide some clarity on top of the guidance from the IRS. At Elite Accounting, Consulting & Tax our goal is always to provide the most current information to help our customers with their tax planning and tax preparation. If you have any more questions about how to claim the Child Tax Credit on your 2021 taxes please contact us today and we’ll do our best to help guide you.

How Much is the 2021 Child Tax Credit?

In previous years the Child Tax Credit was $2,000 per qualifying child. For 2021 the Child Tax Credit has been increased to $3,600 per qualifying child who was under age 6 at the end of 2021, and $3,000 for each qualifying child ages 6 through 17.

There is also a $500 non-refundable Credit for Other Dependents. This credit applies to people who you can claim as a dependent who are not considered qualifying children. IRS Publication 972 has more information on this credit.

How Much of the Child Tax Credit Can I Claim on My 2021 Tax Return?

The answer to this question can depend on a few factors. The American Rescue Plan changed the way Child Tax Credits are paid and claimed for 2021, and your answer will depend on how much money you received in advance Child Tax Credit payments. Under the American Rescue Plan half of the Child Tax Credit was distributed as advance payments during the second half of 2021.

The amount of the credit you’re able to claim will depend on whether your family received advance payments, the amount of those payments if you did receive them, and whether your family experienced changes in tax situation during 2021 (change in filing status or change in the number of dependent children).

To get a real calculation you’ll need to file your 2021 federal tax return.

How Does My Income Affect the Child Tax Credit?

There are two ‘phaseouts’ in the tax code which might reduce the amount of the Child Tax Credit you qualify for.

The Child Tax Credit is reduced as low as $2,000 per qualified child if your modified adjusted gross income (AGI) in 2021 is greater than:
• $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
• $112,500 if you are filing as head of household, or;
• $75,000 if you are a single filer or are married and filing a separate return.

The second phaseout reduces the Child Tax Credit from $2,000 to as low as $0 if your modified adjusted gross income (AGI) in 2021 is more than:
• $400,000 if married and filing a joint return; or
• $200,000 for all other filing statuses.

These phaseouts work by reducing your Child Tax Credit by $50 for each $1,000 that your modified AGI exceeds the income threshold that applies to you.

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Making sense of all the numbers to get to the right answer is what our business is all about!

How Do I Figure Out How Much of the 2021 Child Tax Credit I Can Claim?

Even the IRS will tell you: you need to prepare and file your taxes. We know this isn’t perhaps the answer you were looking for, but we’re tax professionals, and we have to spend a lot of time studying and understanding the tax code. We know these types of changes may not be easy to understand.

Everyone’s tax situation is so different, so there is no simple answer. Come see us or schedule an appointment. It’s Yours. Claim it!

We can help you prepare your taxes and understand the Child Tax Credit and other significant changes in the tax code for 2021. If you’re not fully satisfied that we’ve done the best possible work for you, you don’t have to pay us anything. You can take your business to another tax preparation service, or file your taxes yourself for free online, and we won’t be the least bit upset. That’s our guarantee to you!

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