Who Qualifies, and Who Doesn’t, for the New Child Tax Credit

Jul 16, 2021 | Blog, Uncategorized

Most tax lawyers in Oakland would agree that over the past several years there have been various changes to the US Tax Code. This has left some individuals wondering if their family income or their children’s ages might result in their disqualification from the Advance Child Tax Credit payments.

Fortunately, most households qualify for a partial credit at the very minimum.  However, because requirements and payout schedules are aspects that may quickly become complicated, some individuals choose to consult an Internal Revenue Service tax attorney for help in navigating the process. The current guidelines are quite different from last year’s requirements and schedule.

When tax planning, it is important to understand that families that are eligible are scheduled to receive the full credit, provided they are under the income threshold. If not, the credit slowly phases out until reaching its predetermined cap. To receive the 2021 tax year credit, minors in the household must be 17 years of age or younger through December of this year. Newborns and adopted children who entered the household in 2021 may also qualify.

Families who meet the guidelines automatically receive 50 percent of their 2021 Child Tax Credit amount. The latter is paid via six monthly installments. The other 50 percent can be claimed on their taxes in the future. Alternatively, 100 percent of the tax credits can be claimed in 2022, as long as the family does not participate in the monthly-payment program.

Child Tax Credit

Children’s Age Requirements for the Child Tax Credit

Those with dependents younger than 6-years-of-age by the last day of the year can claim up to $3,600. This figure is approximately $1,600 more than what the same filer was able to claim on a 2020 tax return.

Those with dependents age 6 or older as of the last day of the year qualify for as much as $3,000 per child payable throughout the year. Previously, taxpayers could only claim $2,000 at the most for each dependent 16 years of age or younger.

Smaller amounts are available for those with older children: $500 can be claimed for an 18-year-old, as well as those 19- to 24-years-of-age, provided they are full-time college students. To receive any of the credits mentioned above, the following income guidelines must be met:

  • To receive the full tax credit amount, one’s adjustable gross income must be $75,000 or less per year.
  • For those with an income of more than $75,000 annually, this amount begins to decrease until the credit is phased out entirely at its cap of $240,000 per year.

General Income Qualifications

The income requirement for those who are married and filing jointly is $150,000 or less to be eligible for 100 percent of the Child Tax Credit amount. Above that threshold, the credit is phased out in increments of $50 for every $1,000 that exceeds the threshold. At a $440,000 joint annual income, the tax credit is phased out completely.

The income requirement for someone filing as head of household is $122,500 or less to get the full credit. This amount begins to phase out in the aforementioned increments for those whose income exceeds that amount. It is phased out entirely for those with an income of $240,000 or more per year.

Information for Non-Filers

Payments of Child Tax Credits are automatic for those who claimed all their dependents on their 2019 return and who filed a 2020 tax return. Those who don’t typically file taxes because they have no permanent address or bank account, or do not make enough income, may miss their credits because the IRS will not know where or how to send the payment. Therefore, non-filers who wish to avoid a tax audit or who want to make sure they receive an appropriate Child Tax Credit payment should speak to a tax planning professional.

Anyone who needs assistance with filing a return or help to further understand the new guidelines should contact tax lawyers in Oakland at their earliest convenience.

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