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New Updated Child Tax Credit for 2021

Updated: Feb 1, 2023

2021-April 10th

It’s been quite a long time since Congress made any huge changes to the Child Tax Credit.  Well, it looks like they’ve finally done it.  Hold onto your hat, because its complicated, typical for Congress, can’t make anything simple!

First, the new credit per child is bumped up from $2,000 to $3,000. AND…now you get it for 17-year-olds. (How many years have tax professionals been harping on Congress to include 17-year-olds? Too many for me to count.) But wait, there is more! (Just like an old info commercial). For children under 6 years old, the credit is $3,600.

The old phase-out for high-income families has been added back in. That is definitely the confusing part. The new increased credit amount (not the original $2,000) begins to phase out at Adjusted Gross Income (AGI) of $75,000 for singles, $112,500 for household heads and $150,000 for joint filers. The credit amount is reduced by $50 for each $1,000 of AGI over the applicable threshold amount. Families who aren’t eligible for the new higher credit amounts of $3,000 or $3,600, but have AGI below $400,000 on joint returns or $200,000 on others, still get the $2,000 credit.

Here is the new “weird” provision. IRS is tasked with “refunding” up to 50% of the credit in advance. I guess they got so used to “refunding” the COVID Relief credits in advance that they are now setup to do it on a regular basis. At least that is what Congress thinks. When you ask any IRS employee, they may have a different opinion.

So how will the IRS do this? If they succeed at setting this up in their computers in time, then the IRS will begin sending out payments to qualifying families each month from July through December. The eligibility will be based upon filed 2020 tax returns (or 2019 if 2020 not filed yet). The amount each family will get is based upon AGI, the number of children and the ages of the kids. Families who qualify for the full $3,000 or $3,600 credit could see checks of $250 or $300 per child for that six-month period. Those with higher incomes who qualify for the $2,000 credit could get monthly payments of $167 per child.

You’ll need to let the IRS know of any changes in your family (newborns, divorce allocations, etc.) as well as changes in your AGI for 2021.

Bad news, if you received advanced payment for this Child Tax Credit, when you file your 2021 return it turns out you got more than you were supposed to, most likely (but not always) you will have to pay it back.

One final thought. Currently, this is only a temporary change for 2021. It’s up to the Democrats to decide if they want to extend it further or not. Given their past history, we all may have to wait until mid or late December to find that out.

Did you hear? Psalms 127:3 says, “Behold, children are a heritage of Yahweh. The fruit of the womb is his reward.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at Also on Facebook.

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