How Are the Childcare Tax Credits Different? – TaxAct Blog

Up to date for tax yr 2021

The Child Tax Credit (CTC) underwent some hefty modifications in 2021:

• Max credit score quantity: The credit score’s most quantity elevated from the unique $2,000 per youngster to as much as $3,000 per qualifying youngster age 6-17 and as much as $3,600 for youngsters ages 5 and below in 2021.
• Baby’s age: Youngsters ages 17 and below can qualify for the credit score in tax yr 2021 whereas beforehand the qualifying age was capped at 16.
• Refundability: The CTC is totally refundable in 2021, which means you possibly can declare the complete quantity as a tax refund even when you don’t owe any earnings tax.
• Advance month-to-month funds: Dad and mom of qualifying kids may obtain half of their Baby Tax Credit score in six advance month-to-month installments in 2021, then declare the rest of their credit score when submitting their 2021 tax return.
• No minimal earnings restrict: You don’t want to have earned earnings in 2021 to qualify for this tax credit score.
• Revenue phaseout threshold: The credit score quantity you qualify for begins reducing as soon as your adjusted gross earnings hits a sure threshold: $75,000 for single filers, $150,000 for joint filers, and $112,500 for head-of-household filers.

CTC vs. ACTC in 2021

Earlier than 2021, you couldn’t take the complete CTC when you owed much less earnings tax than the credit score quantity, however you could possibly qualify to declare the Further Baby Tax Credit score (ACTC). The ACTC is a $1,400 refundable credit score, so in earlier years, taxpayers may take the tax break even when they didn’t have any tax legal responsibility — or if the quantity they owed was low.

Issues look just a little completely different this yr after the IRS expanded the common Baby Tax Credit score advantages, making the CTC totally refundable and eliminating the minimal earnings necessities. Nonetheless, the $1,400 ACTC restrict nonetheless usually continues to use to People dwelling overseas. In case your principal house was situated outdoors the U.S. in 2021, you possibly can nonetheless declare the refundable Further Baby Tax Credit score.

The CTC continues to find out your eligibility for the ACTC. In the event you don’t qualify for the CTC, you possibly can’t take the ACTC.