Who Qualifies for the $3600 Child Tax Credit?

The Child Tax Credit is a federal tax benefit assisting families with the costs of raising children. For the 2021 tax year, the American Rescue Plan Act temporarily expanded this credit, increasing the amount to as much as $3,600 for certain children. This enhancement was a one-time change, and the rules governing the credit have since reverted to their previous state. Understanding the qualifications for the 2021 expansion is helpful for those who may still need to file or amend that year’s return and to understand how the credit operates today.

Eligibility for the 2021 Enhanced Child Tax Credit

Child Age Requirements

For the 2021 tax year, the American Rescue Plan created a two-tiered system based on the child’s age at the end of the year. Families could receive a credit of up to $3,600 for each qualifying child who was under the age of 6. For older children who were ages 6 through 17, the maximum credit was $3,000 per child. This was a change from prior and subsequent years, which set the age limit at 16.

Income Thresholds

Eligibility for the full enhanced credit in 2021 was determined by a taxpayer’s Modified Adjusted Gross Income (MAGI). The increased portion of the credit began to phase out for taxpayers with incomes exceeding certain levels. These thresholds were $150,000 for married couples filing a joint return, $112,500 for those filing as head of household, and $75,000 for single filers. For every $1,000 of income above these amounts, the credit was reduced by $50 until it reached the pre-expansion level of $2,000 per child.

Standard Qualification Tests

Beyond the 2021 age and income rules, a child had to meet standard qualification tests. The child was required to have a valid Social Security Number. Several other tests, including relationship, residency, and support, also applied. The relationship test required the child to be a son, daughter, stepchild, foster child, sibling, or a descendant of any of them. The residency test mandated that the child must have lived with the taxpayer for more than half of the year, and the support test required that the child did not provide more than half of their own financial support.

Calculating and Receiving the 2021 Credit

Advance Monthly Payments

The 2021 enhanced credit included the distribution of advance monthly payments. From July through December 2021, the IRS sent payments to eligible families, totaling up to half of their estimated credit amount. For each child under 6, this meant monthly payments of up to $300, and for each child aged 6 to 17, payments were up to $250. These payments were based on information from a taxpayer’s 2020 or 2019 tax return, and the remaining half of the credit was claimed when filing the 2021 tax return.

Full Refundability

The American Rescue Plan made the 2021 Child Tax Credit fully refundable. This meant that even if a taxpayer’s credit amount was more than the income tax they owed, they could receive the entire amount of the credit as a refund. To receive the full refundable amount, the taxpayer or their spouse had to have a main home in the United States for more than half the year.

Claiming the Credit on Your Tax Return

Required Information and Documents

To claim the remaining 2021 Child Tax Credit, taxpayers needed to gather specific information before filing their tax return. This included standard details like each qualifying child’s name and Social Security Number. For the 2021 return, taxpayers needed IRS Letter 6419, “Advance Child Tax Credit Reconciliation.” This letter stated the total amount of payments received and the number of children used to calculate that amount. Married couples who received payments should have received separate letters and needed both to file accurately.

While bank statements might seem like an alternative, the IRS strongly advised using Letter 6419 or the IRS online portal to confirm the payment amounts. Using incorrect figures could lead to processing delays and adjustments to the expected refund. The taxpayer’s Adjusted Gross Income (AGI) was also necessary to calculate the final credit amount.

Completing Schedule 8812

Schedule 8812, “Credits for Qualifying Children and Other Dependents,” was the form used to calculate and reconcile the 2021 Child Tax Credit. It determines the total credit amount based on children’s ages and income. The taxpayer enters the total advance payments from Letter 6419 to reconcile the figures.

The reconciliation shows if the taxpayer is due an additional refund or if they received an overpayment. If the credit was more than the advance payments, the difference is added to the refund. If advance payments exceeded the eligible credit, the taxpayer may have been required to repay the excess, though some repayment protections were available based on income.

The Child Tax Credit After 2021

Current Credit Amount

Under current law, the maximum Child Tax Credit is $2,000 per qualifying child. To be eligible, a child must be under the age of 17 at the end of the tax year. The credit is a nonrefundable credit, meaning it can reduce a taxpayer’s tax liability to zero, but no portion of this base credit can be received as a refund if it exceeds the taxes owed.

Current Refundability Rules

While the main $2,000 credit is not refundable, a portion of it may be claimed as the Additional Child Tax Credit (ACTC), which is refundable. For the 2023 tax year, the maximum refundable amount through the ACTC was $1,600 per child, and for the 2024 tax year, it is $1,700. Eligibility for the ACTC is calculated as 15% of a taxpayer’s earned income above $2,500.

Current Income Thresholds

The income thresholds for claiming the Child Tax Credit begin to phase out for taxpayers with a Modified Adjusted Gross Income (MAGI) over $400,000 for married couples filing jointly. For all other filers, such as single or head of household, the threshold is $200,000.