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How will the new child tax credit affect your taxes in 2022? Here is what you need to know



Unlike stimulus money, households that receive too much child tax credit money up front may have to pay it back to the IRS.

Sarah Tew / CNET

Not all families know the details of the extension child tax credit payments or how credit works differently this year. Fortunately, a host of resources, fact sheets and tools are now available for parents to check their eligibility and more. Up to 92% of all families with children in the United States could receive their first automatic advance payment on July 15 and continue to receive up to $ 300 per month for each child until the end of this year.

But what happens when you file your 2021 tax return next year? The IRS bases the eligibility and amount of the credit on your household’s 2019 or 2020 income tax return, and we know that a lot can change between that date and the next tax season. One way to ensure that a tax adjustment does not result in a refund of money to the IRS is to update your information through the new online tools.

We’ll walk you through the calculations and how to prepare in advance to avoid a possible overpayment. Additionally, there are some important things non-filing families should know about credit so that they can sign up for payments. There are also ways toestimate how much money you can get in all and three quick ways to find out if your family is eligible.


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Child tax credit: everything we know


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Will you have to pay tax on the advance child tax credit money this year?

The short answer is no, but you still need to know some financial details. Child tax credit checks don’t count as income, so you won’t have to pay taxes on payments, Mark Jaeger, vice president of tax operations at Tax law, told CNET.

The IRS calls these checks “early” payments before the 2021 tax season. “This means you just receive the payments sooner rather than waiting to receive that money when you report,” Jaeger said.

While you won’t pay taxes in 2022 on the payments you receive this year, that doesn’t mean you won’t need to repay part of the “early” payment to the IRS when you file your return. income in 2022.

Will you need to report your 2021 payments on next year’s tax return?

Yes. In January 2022, the IRS will send families who received child tax credit payments a letter with the total amount of money they received in 2021. Keep this notice – what the IRS calls it Letter 6419 – you will need it when you file your 2021 tax return during next year’s tax season. (It is not the same letter the IRS sends this year on payments.)

To make sure the IRS has your most recent mailing address, you can update it through the Child Tax Credit Update Portal in the coming months, the IRS said. You can also change address via postal service.

Will you have to repay your child tax credit?

Perhaps. Unless you unsubscribe or opt out of monthly child tax credit payments, you will automatically receive half of your estimated amount that year from the IRS. Forgoing monthly payments means that instead of receiving seven smaller payments – six in 2021 and one in 2022 – you will simply receive one large payment when you file your taxes in 2022.

If for some reason you end up getting paid more than what you are actually entitled to, you may need to return some of the money. This could be the case if a member of your household ends up getting a better paying job that takes you out of your previous income bracket, or if one of your dependents ages out of an age bracket.

These types of changes in circumstances are one of the main reasons the IRS gives people the option to opt out of advance payments. To reduce the risk of receiving an overpayment this year, you will soon be able to update the IRS with your current family status using the child tax credit portal (these update categories on the portal are not yet available). You should continue to keep the IRS informed about family changes until the end of 2021.

It is important to know that if your adjusted gross income, or AGI, for 2021 is below a set income level, you probably won’t owe the IRS anything, even if you received more child tax credit money than you technically should have. Above this income level, the amount you owe to repay gradually increases or increases until you owe a full repayment above a set limit.

This is what the IRS calls “refund protection“so that low-income families do not have to repay.

Income limits for the repayment of child tax credit payments

Filing status

Qualify for full refund protection

Repayment protection is gradually disappearing

Sole depositor

Up to $ 40,000

Over $ 80,000

Deposit as head of household

Up to $ 50,000

Over $ 100,000

Married filing a joint return

Up to $ 60,000

Over $ 120,000

The letter the IRS sends you in January will help you determine if you received an overpayment and if you need to repay some or all of the down payments.

Could you have more child tax credit money in 2022 after filing your taxes?

Yes. After comparing the information in the letter the IRS sends you in January 2022 with what you are entitled to, you may find that you owe more than what you received in advances, based on your actual income. from 2021. If so, you can claim the remaining amount your child tax credit when you file your return.

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If you qualify, you can receive monthly payments starting in July.

Sarah Tew / CNET

Will the child tax credit affect other federal benefits?

According to the IRS, no. Because child tax credit advance payments do not count as income, federal, state, or local agencies cannot use the amount to determine whether you or your family qualify for other benefits or assistance.

For more financial benefits this year, here’s how to save money on child care expenses and health expenditure.

The editorial content on this page is based solely on objective and independent reviews of our editors and is not influenced by advertising or partnerships. It was not supplied or ordered by a third party. However, we may receive compensation when you click on links to products or services offered by our partners.



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