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The Child Tax Credit is fully refundable, here’s what that means

Part of the Build Back Better bill is the child tax credit. The goal for many officials is to extend it through 2022, helping some of the country’s poorest households.

Originally the goal was through the end of 2025, but negotiating brought it back. Some politicians also want to limit who can receive the credit, adding requirements like working or not allowing immigrants to access it.

Before the American Rescue Plan, there were limits on child tax credits that are no longer there. One major change was making the tax credit refundable.

Related: At what age do child tax credit payments stop?

What does it mean when people say the child tax credit is fully refundable?

The way the child tax credit was designed prior to March of 2021 was entirely different.

Low earners could only qualify for part of the tax break, which was up to $1,400. Higher earners could get the full value of the credit.

Anyone that made under $2,500 per year was ineligible for the credit. People needed to meet a certain threshold in earnings before they could receive the credit.

Related: These Americans could get $1,800 by the end of the year, are you one of them?

By making the credit fully refundable this year, people became eligible for a refund which could offset taxes owed.

The Build Back Better plan has not passed yet, so whether the child tax credit is actually going to be extended is unknown.

If it is not extended, the current extension will expire and return to the way it was before the American Rescue Act. 24 million children will become ineligible.

Related: Some parents who received child tax credits this week might need to pay the IRS back

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