The Child Tax Credit (CTC) is a component of the American Rescue Plan and is designed to provide nearly all families up to $3,600 for each child under age 6, and $3,000 for each child between ages 6 to 17.

In past years, parents who filed annual taxes received a lower CTC as a part of their income tax return. Because of the COVID-19 pandemic, however, the CTC changed slightly for the year 2021.

Here’s what you should know about the latest Child Tax Credit:

  • It’s temporary: This is a one-time, one-year expansion of the CTC for your 2021 tax return (which you file in 2022). It was initiated by the government to help provide relief to families during the COVID-19 pandemic.
  • Advance payments began rolling out in July: If you filed taxes in 2020, the IRS automatically began sending monthly payments that will amount to half of the new credit between July and December 2021. You’ll get the second half of the credit when you file your 2022 taxes.
  • The new CTC is a higher amount: In the American Rescue Plan, the CTC amount increased from $2,000 per child to $3,000 per child for children over the age of 6. For children under age 6, the amount went from $2,000 to $3,600.
  • The new CTC has a higher qualifying age: The former CTC used to only account for children up to 16 years old. The new CTC goes to age 17.
  • You don’t need an income to get the new CTC: Prior to 2021, you needed an earned income of more than $2,500 to qualify for the refundable part of the credit. Now, you can have zero income and still claim the CTC.

Here’s another important note: If you get the advance payments between July and December 2021, you will get a smaller child tax credit when you file your 2022 taxes. That’s because you’re getting part of your CTC now, rather than waiting for the full amount when you file your annual taxes.

If you don’t want to receive your CTC in advance, there is still time to opt out of the last CTC monthly payment, which will take place December 15. Use the Child Tax Credit Update Portal to un-enroll yourself (and your spouse, if you are married filing jointly) by the deadline of November 29.

If you’re worried about having to repay your CTC, Congress has enacted repayment protection for families with lower incomes if the IRS overpays you.

Child Custody and the Child Tax Credit

Are you wondering how the Child Tax Credit works with variations in child custody? If you share custody of your children or child with the other parent, whoever claimed the Child Tax Credit on their 2020 return is the one who will receive the advance payments. Only one parent can claim the child on their taxes at a time.

Some parents with shared custody agree to take turns claiming their children on tax returns. For example, one parent might claim the children on even-numbered years, and the other might claim them on odd-numbered years. Since 2020 is an even-numbered year, the first parent will receive the advance CTC payments unless they opted out. However, when they file their 2021 tax return by April 2022, they might have to pay back the advance payments in excess of the Child Tax Credit they’re entitled to claim on that return.

There’s a great deal to keep track of when it comes to the new Child Tax Credit and changes that have developed this year. If you have further questions about the CTC itself, take a look at the list of FAQs provided by the IRS. If you have questions related to child custody or child support, we’re happy to help.

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