Reconciling Advance Child Tax Credit Payments
It's time to file your tax returns, which means it's also time to reconcile those advanced child tax payments! All that free money has to be accounted for! So, be sure to provide a total of how much you've received from July to December of this past year (2021), as it will be factored into your tax filing. The great news is that families with children will likely have higher than usual refunds, especially if you previously stopped these advanced payments. Going into the new year with more money in your pocket?! That's something we can all celebrate.
You should have received your final child tax payment in December, so be sure to check old records if you're on the lookout for it. Final payments were scheduled to be directly deposited into your account on December 15th, with the mailed checks to come in the following weeks. If you did not receive your credit, or if you've opted out, don't worry as this was an advance and your credit will be factored into your 2021 tax return filing.
If you're wondering how much the Child Tax Credits are worth, check out the chart below.
There are, of course, income limitations and phase-outs.
The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI) in 2021.
The first phaseout can reduce the Child Tax Credit to $2,000 per child.
The second phaseout can reduce the remaining Child Tax Credit below $2,000 per child.
The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:
$150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
$112,500 if filing as head of household; or
$75,000 if you are a single filer or are married and filing a separate return.
The first phaseout reduces the credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income thresholds.
The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:
$400,000 if married and filing a joint return; or
$200,000 for all other filing statuses.
The second phaseout reduces the credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income thresholds.
For families with shared custody, you may be repaying a portion of the credit if you received the advance payments and 2021 is not your year to claim the kiddos. If your income is below the following threshold, you would not need to repay any of the advances:
$60,000 if you are married filing a joint return or filing as a qualifying widow or widower;
$50,000 if you are filing as head of household; and
$40,000 if you are a single filer or are married and filing a separate return.
In January 2022, the IRS will send out Letter 6419 providing the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please be sure to include this letter when providing your tax paperwork.
And if all this information is just confusing you more, don't worry, we've got you.
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