Thanks to the American Rescue Plan Act of 2021 (ARPA), there are some changes to the federal income tax child tax credit (CTC) that can benefit you.

How CTC Normally Works

Before we cover the changes, here are some basics for how the CTC worked from 2018-2020 and how it’ll work again from 2022-2025:

  • The maximum annual CTC is $2,000 per qualifying child.
  • Qualifying Children are defined as children under 17.
  • The credit is partially refundable.

The CTC is much more complex than these points, so please reach out if you want to know more about it.

What’s Different for The 2021 CTC?

For the year 2021 only, the CTC is altered with adjustments that can benefit taxpayers. These changes include:

  • Children ages 17 and younger can be counted as Qualifying Children.
  • The maximum CTC is increased to $3,000 per qualifying child, or $3,600 for a qualifying child who is age 5 or younger as of December 31, 2021. However, there are a couple of phaseout rules and your adjusted gross income may be too high, so please contact us for more information
  • The CTC is fully refundable if you’re a resident of the United States for more than half the year, even if you earn no income in 2021. If you’re in the military and stationed overseas, you can still receive this benefit.
  • IRS might make monthly advance payments of CTCs through direct deposits (in the form of monthly installments from July through December 2021). Please contact us for more information.

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