The child tax credit is a tax benefit that can reduce the financial burden faced by American families with young kids. While the child tax credit has been present in previous years, the amount eligible taxpayers can receive as a result of this benefit has reached a historic high in 2021.
The American Rescue Plan Act of 2021 is an economic stimulus bill designed to help Americans weather the economic turmoil brought about by the COVID-19 pandemic. This piece of legislation increased the child tax credit so that taxpayers receive $3,600 for each qualifying dependent child under the age of six and $3,000 for each qualifying dependent child over the age of six.
For an in-depth answer to “how much is the child tax credit for 2021?” and more clarification on who qualifies for it, read this article from start to finish. You can also jump to any section in the article using the links below.
What Is the Child Tax Credit?
The child tax credit is a benefit that reduces your financial burden of Americans who have qualifying dependent children. The child tax credit is designed to ease the burden faced by those with children so that they can better provide for their families. This benefit is a refundable credit—meaning that if you don’t have tax liability to offset, you can get the credit amount in cash to take care of your other expenses.
How much the child care tax credit amounts to in total will depend on a few factors, such as:
- Number of qualifying children you have
- You children’s ages
- Your income
In the next few sections, we’ll go into greater depth about who qualifies—as well as who doesn’t—and how much you can expect to receive.
How Much Is the Monthly Child Tax Credit?
For 2021, the child tax credit has increased significantly compared to previous years. In 2020, taxpayers could claim a maximum tax benefit of $2,000 for each dependent below the age of 17.
So, how much is the child tax credit per month? There is no longer a monthly payment at the moment. Congress has not passed laws to extend this payment.
To help taxpayers support their families, the American Rescue Plan greatly expanded the child tax credit in 2021 so that taxpayers can now receive $3,600 for every dependent child under the age of six and $3,000 for every dependent child over the age of six. The expanded credit benefits roughly 9 in 10 children across the country.
On a monthly basis, the White House reports that most families were automatically receiving monthly payments of $250 or $300 per child as of July 15th, 2021. Taxpayers who qualified for the child tax credit were receiving monthly payments without having to take action.
However, as noted above, there aren’t monthly payments. This may change if laws are passed to extend the payment.
How Much Is the Child Tax Credit for 2021?
If you’re wondering “how much is the child tax credit for 2021?”, it was $3,600 for every dependent child under the age of 6 and $3,000 for every dependent child over the age of six. These figures represent the annual tax benefit for the 2021 tax year—$250 or $300 monthly payments are issued depending on the age of your children.
This all-time high child tax credit will continue to be distributed via monthly payments through 2022 if the necessary laws are passed. The legislation also permanently allows for families with low or no earnings for the year to claim the full credit in order to battle child poverty in the long-term.
How Much Do You Get Per Child?
The American Rescue Plan increased the child tax credit so that taxpayers who have qualifying dependent children under the age of 6 receive a $3,600 benefit, while those with qualifying dependent children over the age of 6 receive a $3,000 benefit.
We’ll walk through an example scenario to better understand what the child tax credit looks like in a real-world situation. Let’s say John and Mary are married and have a 3-year-old son and a 15-year-old daughter. In this scenario, John and Mary are jointly filing their taxes and their adjusted gross income comes out to less than $150,000 per year.
This situation would make John and Mary eligible for the full child tax credit in 2021. Thus, they would receive a $3,600 benefit for their son and a $3,000 benefit for their daughter, for a total of $6,600. John and Mary could either claim the full $6,600 when they file their taxes or receive half of the total ($3,300) in monthly installments and then claim the other half when they file their taxes.
While this may seem like a lot of money, the cost of providing for dependent children can quickly add up. To learn how to make your money last and improve your financial wellbeing, check out our personal finance tips.
Is Everyone Entitled to the Child Tax Credit?
Not everyone is able to claim the child tax credit. In order to be eligible for the child tax credit, you must meet certain criteria. Eligibility hinges primarily on income, but also on whether or not your child meets the definition of a dependent.
How Do You Qualify for the Child Tax Credit?
To qualify for the full child tax credit, your modified adjusted gross income must fall within the following guidelines:
Filing status:
Head of household
Married filing jointly
Modified adjusted gross income (MAGI):
$112,500 or less
$150,000 or less
In addition to meeting the corresponding income threshold based on filing status, your child must qualify as a dependent to claim the child tax credit. In order to be considered a dependent, the following must be true:
- Your child must be 17-years-old or younger
- You provided at least half of your child’s financial support over the past year.
- Your child lived with you for at least half of the past year.
- Your child is not filing a joint tax return.
Exceptions do exist for some of these qualifications. Visit IRS.gov to learn more about eligibility criteria for the child tax credit.
When Do Child Tax Payments Come in?
Typically, eligible taxpayers can claim the child tax credit when they file their tax returns. However, 2021 is the first time the IRS has disbursed the child tax credit in monthly payments.
Eligible taxpayers automatically received either $250 or $300 per month, spanning from July 15th to December 15th. This means those who qualified for the full child tax credit received either $1,500 or $1,800, and may claim the other half of the benefit when they file their 2021 tax return.
While the child tax credit saw an increase in 2021, it may revert back to $2,000 in 2022. The law is set to expire unless Congress takes action and passes a bill to increase the benefit once again. So going forward it’s important to keep asking, “how much is the child tax credit this year?” to make sure you know how much you’ll be getting.
How Does the Child Tax Credit Impact Your Taxes?
The child tax credit can provide you with a dollar-for-dollar reduction in your tax liability.
If you were one of the taxpayers who received half of your child tax credit in monthly payments spanning from July to December, you’ll be able to claim the other half when you file your tax return in 2022. If you opted out of monthly payments or didn’t receive monthly payments yet qualified for the child tax credit, you’ll likely be able to claim the full benefit on your next tax return.
Keep in mind that if you received monthly payments from the child tax credit and you weren’t eligible for the benefit, this can increase your tax burden because you’ll be expected to pay that money back.
Create a Financial Plan With Mint
When it comes to how much the child tax credit is for 2021, taxpayers are receiving a larger benefit than they have in years past. This is good news for Americans who have families to support, as they’ll face a lower tax burden going into 2022. However, to get the most out of that extra money, it’s important to manage it with care.
Use the Mint app to easily and effectively manage your family’s monthly budget. With our app, you can set financial goals, track spending, and make sure every dollar you receive from the child tax care credit goes a long way in helping your family. So, whether you’re trying to budget for a baby or access monthly budget templates, the Mint app can enable you to achieve all of your personal finance goals.
Download the Mint app and empower yourself to take control of your finances with a helpful tool that provides you with the easy-to-read financial info you need to make decisions and improve your overall fiscal well-being.
Sources: Center on Budget and Policy Priorities | IRS 1, 2 | White House