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Child Tax Credit: Will I need to pay it back?

Every year when Americans claim tax credits, the child tax credit is an option. It has been since 1997 under the Taxpayer Relief Act.

child tax credit paperwork

The credit from that point until very recently was worth $2,000 per dependent.

For 2021, the credit was increased to $3,600 for kids ages 5 and under and $3,000 for kids ages 6-17.

This change was made under the American Rescue Act.


What is a child tax credit reversal?

What changed for the child tax credit besides the amount in 2021?

To collect the credit before, there was a $2,500 earned income credit required.

This has been dropped and the full credit is entirely refundable now.

In addition, the IRS paid one half of the credit in advance to parents.

The remaining half can be claimed on your 2021 tax return in 2022.


Will I need to pay back the child tax credit?

If your income changes you may end up needing to pay it back.

The advanced payments were based on income from the 2020 tax year.

This means if you exceed $80,000 as a single filer or $120,000 jointly, you’ll need to pay back the money.

The IRS was not aware of incomes that increased.

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