How much is claiming a dependent worth

menu

Main menu

• About CBO
• Topics
• Cost Estimates
• Data
• Interactives
• FAQs
• Blog

January 23, 2020

Report

CBO examines the tax benefit of having dependents under current law in 2019 and 2026 and analyzes how three policy options that would simplify dependent-related tax provisions would affect that benefit.

View Document

1.04 MB

Summary

Data and Supplemental Information

• Data Underlying Exhibits

Related Publications

• Using Survey Data for Tax Analysis

  December 16, 2021

• The Budget and Economic Outlook: 2019 to 2029

  January 28, 2019

• Marginal Federal Tax Rates on Labor Income: 1962 to 2028

  January 24, 2019

• An Overview of CBO’s Microsimulation Tax Model

  June 22, 2018

• Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016

  November 19, 2015

• Refundable Tax Credits

  January 24, 2013

What is the child tax credit?

The child tax credit, or CTC, is an annual tax credit available to taxpayers with qualifying dependent children. It was first introduced as part of the Taxpayer Relief Act of 1997 and has played an important role in providing financial support for American taxpayers with children.

The tax credit — normally up to $2,000 per qualifying dependent — was expanded to a maximum of $3,600 in 2021 as part of the American Rescue Plan (the coronavirus relief package that took effect in March). And, for the first time in U.S. history, many taxpayers also received half of the credit as advance monthly payments from July through December of 2021.

🤓Nerdy Tip

By the end of January, all recipients of the advance child tax credit payments should receive Letter 6419, which will provide a breakdown of all the advance payments disbursed to you. The IRS has asked taxpayers to use the letter to reconcile the credit on their 2021 returns. If you suspect your Letter 6419 states an inaccurate advance payment total, the IRS advises visiting your IRS online account for the most up-to-date information.

Who qualifies for the child tax credit?

For the 2021 tax year, you can take full advantage of the expanded credit if your modified adjusted gross income is under $75,000 for single filers, $112,500 for heads of household, and $150,000 for those married filing jointly.

The credit begins to phase out above those thresholds.

• First phaseout: Income exceeds the above thresholds but is below $400,000 (married filing jointly) or $200,000 (all other filing statuses). Your total credit per child can be reduced by $50 for each $1,000 (or a fraction thereof). This phaseout will not reduce your credit below $2,000 per child.

• Second phaseout: Income exceeds $400,000 (married filing jointly) or $200,000 (other filing statuses). The phaseout will continue docking $50 per each $1,000 and begin to reduce your credit per child below $2,000. You may be disqualified from the credit altogether.

Some of the other eligibility requirements for the child tax credit include:

• You must have provided at least half of the child’s support during the last year, and the child must have lived with you for at least half the year (there are some exceptions to this rule; the IRS has the details here).

• The child cannot file a joint tax return.

• You must have lived in the U.S. for more than half the year (or, if filing jointly, one spouse must have had a main home in the U.S. for more than half the year).

How much you can get per child

For the 2021 tax year, the child tax credit offers:

• Up to $3,000 per qualifying dependent child 17 or younger on Dec. 31, 2021.

• Up to $3,600 per qualifying dependent child under 6 on Dec. 31, 2021.

If you took advantage of the advance payments, the IRS most likely sent half of the credit in the form of monthly payments from July through December of 2021. Those with qualifying dependents 17 or younger might have received up to $250 monthly per qualifying dependent and those with children 5 or younger might have received up to $300 monthly per qualifying dependent.

How the child tax credit will affect your taxes

For the 2021 tax year, the CTC is fully refundable — that is, it can reduce your tax bill on a dollar-for-dollar basis, and you might be able to get a tax refund check for anything left over. How much of the credit you claim on your 2021 return will depend on whether you opted in for advance payments, how much you received as an advance, as well as your tax-filing circumstances.

If you received advance payments

Letter 6419 contains a detailed summary of the money you received from the advance CTC payments. It also confirms the number of qualifying dependents the IRS used to calculate those advance payments. This information will help you to reconcile the credit when you file your return.

If you opted out of advance payments

If you opted out of the advance payments before the first one was disbursed in July, claiming the credit on your return will likely be much simpler. When you file, you'll simply confirm that you're eligible for the credit and then claim the full amount you're entitled to based on your 2021 income and number of qualifying dependents.

If you don't normally file taxes

Low-income families who may not normally file a tax return had the option to sign up for advance payments using the IRS's non-filers sign-up tool. To claim the balance (or the full credit if you didn't receive the advance payments), you'll need to file a return this year.

Will you have to pay back the child tax credit?

First, some good news. The child tax credit is not considered taxable income. It's a credit, which means it can lower your tax bill or potentially result in a refund. However, things get a little tricky if it turns out that you were overpaid on your advance payment.

The advance payments were a prepayment of the 2021 tax credit you would normally claim in full during filing season. But because half of the credit was sent out early, the IRS likely used your most recent tax return (2020 or older) to determine how much of an advance to send you each month. So, if your financial or personal circumstances (such as your filing status, income, custody arrangements or residency status) have changed in 2021, there's a chance you might have received more of an advance than you're actually eligible for. A few ways this could play out:

• Let's say you received advance payments totaling $1,500 for your qualifying dependent based on your 2020 income. However, your income has increased significantly in 2021, making you eligible only for a reduced credit. The excess paid out to you is considered an overpayment.

• Another example: You're a single filer with one dependent who lived in the U.S. in 2020. The IRS then sent you advance payments based on that information, which you accepted. However, in 2021, you actually lived outside of the U.S. for more than half the year, making you ineligible for the child tax credit. Accepting the payment would also be considered an overpayment.

If it turns out that you were given more of an advance than you were eligible for, you’ll need to report it as additional income tax to the IRS on your 2021 return. That additional income tax will either reduce your refund or potentially increase your tax bill.

Some people who were overpaid may also be eligible for repayment protection, meaning they won't need to repay the IRS. You can learn more about who qualifies on the IRS website. If you're unsure how to reconcile your credit or believe you may have been overpaid, quality tax software or working with a professional tax preparer can help you to reconcile your credit before the tax-filing deadline.

Frequently asked questions

I had a baby in 2021. Am I eligible for the CTC?

Yes. Parents of newborns in 2021 are eligible for the child tax credit. You can claim the credit when you file your 2021 return.

The child tax credit update portal shows that a payment was issued, but I didn't receive it. What steps do I take?

If the child tax credit update portal and your IRS online account show that you were issued a payment that you did not actually receive, you can call the IRS to report the missing payment and request a trace at 800-908-4184 (7 am to 7 pm local time).

The agency urges you to have the following information on hand when you call: the payment date, payment method, status, and the amount listed in the CTC update portal.

If the IRS determines that the payment was not received by you or returned to the agency, the IRS will update its records, and those who are eligible can claim the missing amount on their 2021 return.

Are the advance child tax credit payments permanent?

No. Legislation to extend the enhanced credit amount and advance payment structure has not been passed. For now, the child tax credit for the 2022 tax year will revert back to its original max of $2,000 per qualifying dependent.

Is the child tax credit taxable?

No, the child tax credit is not considered income and therefore is not taxable. However, if the IRS overpaid you (i.e., the amount you received is more than you can claim), you may need to reconcile the overpayment on your 2021 tax return.

Estimate your child tax credit amount

	Federal: $24.95 to $64.95. Free version available for simple returns only. State: $29.95 to $44.95. All filers get access to Xpert Assist for free until April 7. Promotion: NerdWallet users get 25% off federal and state filing costs.
	Federal: $39 to $119. Free version available for simple returns only. State: $49 per state. TurboTax Live packages offer review with a tax expert. Promotion: NerdWallet users can save up to $15 on TurboTax.
	Federal: $29.99 to $84.99. Free version available for simple returns only. State: $36.99 per state. Online Assist add-on gets you on-demand tax help.