​Reminders and FAQs About The Childcare Tax Credit Changes

If you got any Advance Child Tax Credit payments in 2021, the IRS will be sending you a letter. In letter 6419, you should find how much money you received and the number of your children the government used to calculate your payments.

You'll need to keep that letter with the rest of your tax records and make sure your tax preparer has a copy.

If your family received ACTC payments, you'll need to file a 2021 tax return. In that return, you'll have to compare the Child Tax Credit payments you got in 2021 with the amount of the CTC you can claim on your 2021 tax return. You can also see how much your family received on the IRS's CTC portal.

Also, this week, the IRS released several FAQs on its website. Though there's not any new information, there are a lot of details if you have questions about CTC.

But let’s back up and do a quick CTC refresher: The American Rescue Plan that became law in March increased the CTC for many taxpayers. The credit is fully refundable. That means, as a taxpayer, you can benefit from the credit even if you don’t owe any income taxes.

For the 2021 tax year, the government increased the CTC from $2,000 for each qualifying child to:

• $3,600 for children ages 5 and under at the end of 2021; and
• $3,000 for children ages 6 through 17 at the end of 2021.

The government plans to pay out half of those amounts over the course of six months and the rest with your tax return. The CTC amount you receive will get reconciled on your 2021 tax return (those will be the taxes you file in early 2022.)

To get the full Childcare Tax Credit amount, your modified adjusted gross income — if you’re married filing jointly — has to be less than $150,000 (for those filing as head of household, the amount is $112,500, and for those filing as single or married but filing a separate return, the amount is $75,000.)

If you make more than those amounts according to your filing status, you might have to repay the advanced payments come tax time.

If there’s anything we can do to help you understand the CTC changes, please let us know.