You Can Still Get the CTC for Tax Year 2021
November 7, 2023
How to Claim CTC in Tax Return 2021
Introduction
Hey there, welcome to Bottomline Tax! If you have kids under 18, you might be eligible for a sweet tax break this year: the Child Tax Credit (CTC). The CTC is a credit that reduces your tax bill by up to $3,600 per qualifying child. And the best part is, you might have already received some of it as advance payments from July to December 2021. But don’t worry, if you did not receive any advance payments you can still claim the whole credit if you file a 2021 tax return. In this article, we’ll explain everything you need to know about the CTC, how it changed in 2021, who qualifies for it, and how to claim it.
Understanding the Child Tax Credit
The CTC is a tax credit that helps families with the cost of raising children. A tax credit is different from a tax deduction because it directly reduces your tax liability, dollar for dollar. For example, if you owe $5,000 in taxes and you get a $2,000 tax credit, you only have to pay $3,000. A tax deduction, on the other hand, only reduces your taxable income, which may or may not lower your tax bill depending on your tax bracket.
The CTC has been around since 1997, but it got a major boost in 2021 thanks to the American Rescue Plan Act (ARPA), which was passed in March 2021 to provide relief from the COVID-19 pandemic. The ARPA increased the amount of the CTC, made it fully refundable, and allowed half of it to be paid in advance throughout 2021.
What is the CTC and how did it change in 2021?
The CTC is a tax credit that you can claim for each qualifying child that you have. How to know if your children qualify for this credit? We have a tool for that.
In 2021, the amount of the CTC increased from $2,000 to $3,600 for children under age 6 and from $2,000 to $3,000 for children ages 6 to 17. The ARPA also made the CTC fully refundable, which means that you can get the full amount of the credit even if you don’t owe any taxes. Before 2021, only $1,400 of the CTC was refundable.
Another big change in 2021 was that the IRS started sending out advance payments of up to half of the CTC to eligible taxpayers from July to December 2021. These payments were based on your 2019 or 2020 tax return or information you entered on an online tool. The advance payments were meant to help families with their expenses during the pandemic. The other half of the CTC can be claimed on your 2021 tax return.
Eligibility for the Child Tax Credit
To be eligible for the CTC, you (and your spouse, if married filing jointly) must have:
- Filed a 2019 or 2020 tax return and claimed the CTC on the return or
- Entered your information in 2020 to get stimulus (Economic Impact) payments with the Non-Filers: Enter Payment Info Here tool or
- Given the IRS your information in 2021 with the Non-Filer: Submit Your Information tool
You (and your spouse, if married filing jointly) must also have:
- Lived in a main home in the United States for more than half of 2021 (the 50 states and the District of Columbia) or filed a joint return with a spouse who has a main home in the United States for more than half of 2021 and
- A qualifying child (use our tool to figure this out)
- Made less than certain income limits.
The income limits for the CTC depend on your filing status and the number of qualifying children you have. The table below shows the maximum income you can have to get the full amount of the CTC ($3,600 per child age 5 and under, or $3,000 per child age 6 to 17) and the reduced amount of the CTC ($2,000 per child).
| Filing Status | Number of Qualifying Children | Maximum Income for Full CTC | Maximum Income for Reduced CTC |
|---|---|---|---|
| Single, Head of Household, or Qualifying Widow(er) | One | $75,000 | $200,000 |
| Single, Head of Household, or Qualifying Widow(er) | Two | $112,500 | $200,000 |
| Single, Head of Household, or Qualifying Widow(er) | Three or more | $150,000 | $200,000 |
| Married Filing Jointly or Married Filing Separately | One | $150,000 | $400,000 |
| Married Filing Jointly or Married Filing Separately | Two | $150,000 | $400,000 |
| Married Filing Jointly or Married Filing Separately | Three or more | $150,000 | $400,000 |
If your income is above these limits, you may still qualify for a partial CTC. The credit is reduced by $50 for every $1,000 (or fraction thereof) that your income exceeds the limit. For example, if you are single with one qualifying child and your income is $76,500, your CTC is reduced by $75 ($50 x 1.5), so you can get $3,525 ($3,600 – $75).
Claiming the Child Tax Credit
To claim the CTC, you need to file a 2021 tax return and report your income and expenses for the year. You also need to enter your information about your qualifying children and other dependents on Form 1040, U.S. Individual Income Tax Return. If you received advance payments of the CTC in 2021, you also need to attach a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.
How can one claim the CTC on Form 1040?
Look at the first page of Form 1040, there’s a section called Dependents. You need to write the names and social security numbers of each of your children (column 1 and 2). Also you have to write their relationship to you and finally check the correct box for the tax credit you want to claim (columns 3 and 4). Remember that in this case you want the Children Tax Credit (CTC). You cannot select both credits for the same dependent.
If you have more than four dependents, you can still include them in your IRS Form 1040. Here’s how:
- Enter the first four dependents on the first page as describe above.
- If you have more than four dependents, check the box under Dependents on page 1 of Form 1040.
- Include a statement showing the information required in columns (1) through (4).
