Early Child Tax Credit Payments: How They Impact Your Taxes

Early Child Tax Credit Payments: How They Impact Your Taxes

Eligible households will obtain the second half of the kid tax credit score of their tax refunds.


Sarah Tew/CNET

This story is a part of Taxes 2022, CNET’s protection of one of the best tax software program and all the pieces else it is advisable get your return filed rapidly, precisely and on-time.

In a yr of large tax modifications and problems, the expanded youngster tax credit score stands out as significantly noteworthy for its breadth — about 30 million tax filers declare the credit score — and the truth that half of the cash from it has already been distributed to many households through advance month-to-month funds within the latter half of 2021.

If you’ve got obtained your youngster tax credit score letter from the IRS, it is best to be capable to calculate the influence of final yr’s advance funds in your taxes this yr. If you did not obtain that letter or threw it away, do not panic — all the info might be discovered with an on-line IRS account.

Last yr’s month-to-month funds had been based mostly on both your 2019 or 2020 tax return. However, in case your life circumstances modified because you final filed, it may’ve resulted in an overpayment. For occasion, when you obtained an revenue improve after you filed your 2020 taxes or in case your child aged out of an eligibility bracket, you may owe cash to the IRS when an adjustment is made in your 2021 return. 

It all sounds complicated, however the IRS has assets that can assist you test your eligibility. You’ll additionally wish to make certain all of the particulars in your youngster tax credit score letter are appropriate. Read on to study all in regards to the youngster tax credit score and the way it impacts your tax return and tax refund this yr.

For extra, find out about CNET’s greatest tax software program, choices for submitting your taxes free of charge and extra deductions and credit that might have an effect on your tax refund this yr.


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Child tax credit: Everything we know

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Will I owe the IRS money for last year’s child tax credit checks?

The short answer is no, but you still need to know some financial details. The child tax credit checks don’t count as income, so you won’t have to pay income tax on the payments, Mark Jaeger, vice president of tax operations at TaxAct, told CNET. The IRS referred to these checks as “advance” payments ahead of 2021 tax season: “That means you’re simply getting the payments sooner rather than waiting to receive that money when you file.”

While you won’t pay taxes this year on the payments you receive in 2021, you still may need to repay the IRS some part of the advance payment when you file your income tax return in 2022. We’ll explain below.

Will I have to return the money if I got more than I was supposed to?

Maybe. Unless you opted out of the monthly child tax credit payments, you should’ve automatically received half of your estimated amount in 2021 from the IRS. Forgoing the monthly payments means that instead of receiving smaller installments between July and December last year, you’ll simply collect your money when you file your 2021 tax return.

If for whatever reason you did wind up getting more child tax credit money than you actually qualify for because of outdated household details, you might need to repay some of the money to the IRS. That could be the case in the following scenarios:

  • If someone in your household got a better-paying job last year, increasing the adjusted gross income and pushing you above or out of a previous income bracket.
  • If one of your dependents aged out
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    of an age bracket sometime last year. For example, if your 5-year-old turned 6 in 2021, that would qualify you for a smaller payment. Or if your 17-year-old turned 18 in 2021, you would no longer be eligible for the amount you received.
  • If there is a change in custody. Two examples: if parents divorced and have a shared custody arrangement, or if the parent with custody changes from one year to the next. In a joint custody situation, only one parent can claim the credit for a given child.
  • If your main home was in the US for more than half of 2020, but not in 2021, you’d no longer qualify for payments.

Those kinds of changes in circumstances are a big reason why the IRS gave folks the chance to opt out of the advance payments.

What are the income caps for repaying child tax credit money?

If your household’s adjusted gross income, or AGI, for 2021 was below a set income level, you likely won’t owe the IRS anything, even if you received more child tax credit money than you technically should have. This is what the IRS calls “repayment protection” so that lower-income families won’t be on the hook to repay any money. Above a certain income level, the amount you need to repay increases or phases in until you owe full repayment.

The letter the IRS sent out between December 2021 and January 2022 can help you determine if you received an overpayment and if you need to repay all or part of the advance payments. See below for more on that letter.

Income caps for repaying child tax credit payments

Filing status Qualify for full repayment protection Repayment protection phases out
Single filer Up to $40,000 Over $80,000
Filing as head of household Up to $50,000 Over $100,000
Married filing a joint return Up to $60,000 Over $120,000

Will I have to report my total child tax credit payments when I file taxes this year?

Yes. Between December 2021 and this January, the IRS sent families that received child tax credit payments a letter with the total amount of money they got in 2021. Hold on to this notice — which the IRS is calling Letter 6419 — as you’ll need information from it when you file your 2021 tax return. 

To make sure the IRS has your most recent mailing address, you can update it using the Child Tax Credit Update Portal. You can also change your address through the Postal Service.

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You’ll receive the rest of your child tax credit money when you file your taxes this year. 


Sarah Tew/CNET

Will the rest of my child tax credit money arrive with my tax refund?

Yes. After you compare the information on the letter the IRS sent you with what you’re eligible for, you may discover you’re due more than you received in advance payments, based on your actual 2021 income. If that’s the case, you can claim the remaining amount of your child tax credit when you file your return.

Does child tax credit money affect other federal benefit amounts I receive?

According to the IRS, no. Because the advance child tax credit payments don’t count as income, federal, state or local agencies can’t use the amount when determining if you or your family are eligible for other benefits or assistance.

For more financial benefits this year, here’s how to save money on child care costs.

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