2021 U.S. Child Tax Credit Policy Adjustment Q&A-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Taxation - USA

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2021 U.S. Child Tax Credit Policy Adjustment Q&A

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The child tax credit is a tax credit policy. This policy has been expanded several times since its inception in 1997. The main purpose of this policy is to help low-and middle-income families more afford to raise their children.

Q：

What is the child tax credit policy before 2021?

A：

According to the current tax policy, the maximum amount of the child tax credit for each eligible child aged 16 or below is $2,000 per child. This tax credit is a partially refundable tax credit (partially refundable). If there is any remaining after deducting federal income taxes, only $1,400 can be refunded to the taxpayer.

Q：

What adjustments have been made to the child tax credit policy in 2021?

A：

Starting from 2021, there have been two major changes to the child tax credit. The first is that the previous portion refundable (partially refundable) has become fully refundable (fully refundable). The second is that the maximum amount that can be refunded has been increased. The maximum amount can reach $3,000 for each eligible child when the child is between the ages of 6 and 17 in the 2021 tax year. The maximum amount can reach $3,600 for each eligible child when the child is less than 6 years old in the 2021 tax year. The new tax law policy also includes children who have reached the age of 17 during the 2021 tax year in the scope of the child tax credit.

Q：

How does the 2021 child tax credit decrease with the modified adjusted gross income (MAGI) increase?

A：

In addition, the child tax credit will gradually decrease as the Modified Adjusted Gross Income (MAGI) increases. As shown in the following figure：

2021 Child Tax Credit (For children aged 0-5 years old)	File Status	Modified Adjusted Gross Income (MAGI)	Child Tax Credit（CTC）
	Married Filing Joint	US$0 to US$150,000	$3,600
		US$150,000 to US$170,000	Decrease （not less than $2,000）
		US$170,000 to US$400,000	$2,000
		More than US$400,000	Reduced to $0
	Single	US$0 to US$75,000	$3,600
		US$75,000 to US$95,000	Decrease （not less than $2,000）
		US$95,000 to US$200,000	$2,000
		More than US$200,000	Reduced to $0

2021 Child Tax Credit (For children aged 6-17 years old)	File Status	Modified Adjusted Gross Income (MAGI)	Child Tax Credit（CTC）
	Married Filing Joint	US$0 to US$150,000	$3,000
		US$150,000 to US$170,000	Decrease （not less than $2,000）
		US$170,000 to US$400,000	$2,000
		More than US$400,000	Reduced to $0
	Single	US$0 to US$75,000	$3,000
		US$75,000 to US$95,000	Decrease （not less than $2,000）
		US$95,000 to US$200,000	$2,000
		More than US$200,000	Reduced to $0

Q：

How do I know if a taxpayer is eligible for the 2021 child tax credit?

A：

Eligibility for receiving the child tax credit - - - 2021 (meet all the following requirements)

As of December 31, 2021, the age of children is 17 years old or below.
Child will not be able to provide himself/herself with more than half of the financial support in 2021.
Child are the taxpayer’s son, daughter, stepchild, eligible adoptive son, brother, sister, stepbrother, stepsister, half-brother, half-sister, or any of the descendants (for example, the taxpayer's grandson, niece, or nephew).
The child must be declared as a dependent on the taxpayer’s tax return.
Child lives with taxpayer for more than half of the time (at least183 nights) during 2021. The temporary absence of a taxpayer or a child for special reasons, such as school, holidays, business, medical care, military service, or detention in a juvenile prison, is counted as the time the child and the taxpayer live together.
The child is a U.S. citizen, a U.S. national or a foreign resident of a U.S. citizen.
Child must have a social security number (SSN).

Reference:
https://www.irs.gov/pub/irs-pdf/p972.pdf
https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-c-calculation-of-the-2021-child-tax-credit
https://www.taxoutreach.org/tax-credits/child-tax-credit/whats-new-about-the-child-tax-credit-in-2021/

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