The Advance Child Tax Credit Explained

On July 15th, 2021, eligible parents automatically began receiving advance Child Tax Credit payments from the federal government. It is important taxpayers know the implications of this credit.

The Advance Child Tax Credit Explained

The Advance Child Tax Credit allowed eligible taxpayers to receive 50 percent of their credit in equal monthly installments starting in July 2021. The remaining 50 percent is to be applied on their 2021 taxes.

It works this way: A child aged 6 years or younger may qualify for a $3,600 annual tax credit, so the parent or caregiver may have received a monthly payment of up to $300 per month between July 2021 and December 2021. Children between the ages of 6 and 17 qualify for an annual credit of $3,000, or up to $250 per month.

To be eligible for the advance payment, the taxpayer must (1) have claimed the Child Tax Credit on their 2019 or 2020 tax return, (2) be a U.S. resident residing in the U.S. for at least six months of the year, and (3) meet certain income limits. The advance credit was phased out or eliminated completely for taxpayers whose AGI is above:

  • $150,000 for married taxpayers filing jointly and qualifying widows or widowers;
  • $112,500 if filing as head of household; or
  • $75,000 for single filers or married taxpayers filing separately.

If you received a total amount of advance Child Tax Credit payments that exceeds the amount of Child Tax Credit that you can properly claim on your 2021 tax return, you may need to repay to the IRS some or all of that excess payment if you do not qualify for full repayment protection.

The IRS made the advance payments automatically in July, August, September, October, November and December.

Use the Child Tax Credit Update Portal on the IRS website for more information.

The specific rules and tax implications relating to this credit can be complex, so be sure to consult your Nisivoccia tax professional to discuss your situation.