What You Should Know About the Advance Child Tax Credit Payments
The July and August advance Child Tax Credit payments have now been distributed. That means there are four more monthly payments expected this year. This blog post will go over some information you may want to know about how these payments may affect your taxes next year and why you may want to unenroll for future payments.
Are advance Child Tax Credit payments taxable?
No, advance Child Tax Credit payments are not taxable. Since they are advance payments of your 2021 Child Tax Credit, it is not considered income.
Do advance Child Tax Credit payments affect government benefits?
Advance payments you receive for the Child Tax Credit will not affect any government benefits you receive. Since it is not counted as income, it will not be used in determining your eligibility for benefits or how much you receive.
Will I need to repay the advance Child Tax Credit payments?
If the total amount of advance Child Tax Credit payment you receive this year exceeds the amount of the Child Tax Credit you claim on your 2021 tax return, you may need to repay some or all of the excess payment. This may be the case, for example, if:
You claimed more qualifying children in 2019 or 2020 than you will in 2021;
Your income has gone up and pushed you into a higher bracket;
Your child has aged out of their bracket (turned 6- or 18-years-old) in 2021;
Your filing status or custody has changed; or
You lived outside of the United States for more than 6 months in 2021;
The IRS will be sending out Letter 6419 in January 2022 letting you know the total amount of advance Child Tax Credit payments you received in 2021 and if you will need to repay any of the credit. Please keep this letter — you may need to refer to it when filing your 2021 taxes!
Repayment Protection
In some cases, repayment protection is available if you were overpaid for the total advance Child Tax Credit. You may qualify for the full repayment protection amount if your main home was in the U.S. for more than 6 months and your AGI is equal to or less than:
$60,000 for married filing joint or qualified widow or widower;
$50,000 for head of household; or
$40,000 for single filers or married filing separately.
The full repayment amount equals $2,000 multiplied by the initial estimate of qualifying children when receiving the advance Child Tax Credit payments minus the actual amount of qualifying children on your 2021 tax return. If your AGI is higher, then the repayment protection amount will be phased out.
Updating information for the advance Child Tax Credit payments
It's important you keep your information up-to-date to avoid being overpaid. The Child Tax Credit Portal currently allows you to make changes to your bank account information and your address. They are expected to allow changes to dependents, marital status, and income later this summer.
Unenrolling from the advance Child Tax Credit payments
If you do not want to receive any more monthly advance Child Tax Credit payments, you can also unenroll through the Child Tax Credit Update Portal. This allows you to claim the remaining credit amount when you file your 2021 tax return.
If you are married filing jointly, both you and your spouse will need to unenroll from payments. If only one of you unenrolls, you will receive half the joint payment amount.
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or visit the additional resources below to see how this information may apply to you.
