Beware: You might have to pay back the Advance Child Tax Credit

As part of the American Rescue Plan Act of 2021,there is an expanded child tax credit with an option for advance payments and of course, it is confusing so let’s try and break it down:

2020 Child Tax Credit

  • Age 16 and under – $2000/child
  • Phases out starting at Modified Adjusted Gross Income (MAGI) of $400k Married Filing Joint (MFJ) or $200k All Other Filing statuses

2021 Original Child Tax Credit

  • Age 17 and under – $2000/child
  • Phases out starting at MAGI of $400k MFJ or $200k All Other Filing Statuses

2021 Additional Child Tax Credit

  • Age 6 through 17 – additional $1000 per child
  • Age 5 or under – additional $1600 per child
  • Phases out starting at MAGI of $150k MFJ, $112.5k Head of Household, or $75k All Other Filing Statuses

Advance payments of the 2021 Child Tax Credit

  • The IRS will be mailing checks to taxpayers from July through December 2021 of 50% of the anticipated 2021 child tax credit
    • The payment amount will be calculated using the taxpayer’s filing status, MAGI, and # of children from the 2020 tax return (or 2019 if 2020 has not been filed yet)
    • If you receive too much money in the advance payments you WILL have to pay it back on your 2021 tax return. (There is a safe harbor so you may not have to repay the entire amount)
  • You are able to opt-out of the prepayments and just claim the tax credit in full on your 2021 tax return. You are also able to provide updated information to the IRS to make the calculation for you more accurate. The IRS will release an online portal “soon” for these updates



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