Advance Child Tax Credit

Many of you may have started to receive the Advance Child Tax Credit Payments that the IRS has been sending out over the last week. We wanted to share some words of wisdom as far as your 2021 tax filings are concerned:

  • This money is an estimated, advanced payment of what the IRS thinks your Child Tax Credit will look like in 2021.

    • This means that you may receive less than you typically receive next April when you file your tax return.

    • If the IRS has incorrectly calculated this advanced payment, you may end up owing the money back to them.

  • Please keep all of your letters pertaining to your advanced payments (Form 6419). Like the stimulus checks that have been sent out, the IRS will require you to reconcile the amount you received against what they have on file as paying you (and failure to produce a matching result may delay your refund).

  • Your Modified Adjusted Gross Income (Modified AGI) is your Adjusted Gross Income (line 11 on your 2020 tax return) plus any foreign earned income that was otherwise excluded from being taxed in the US.

  • Please use the following table as a guide to estimate your 2021 Child Tax Credit and think about if having the advance payments is in your best interest, long term:

If your filing status is:

And your Modified AGI is

Your credit will most likely be:

Married Filing Jointly

Less than $150,000

You are entitled to the full credit ($3,600 or $3,000 depending on your child’s age)

Between $150,000 and $400,000

Your credit will be phased out by $50 for every $1,000 over $150,000 but will be at least $2,000

Over $400,000

Your credit will be phased out again by $50 for every $1,000 of income over $400,000 all the way to $0

Head of Household

Less than $112,500

You are entitled to the full credit ($3,600 or $3,000 depending on your child’s age)

Between $112,500 and $200,000

Your credit will be phased out by $50 for every $1,000 over $112,500 but will be at least $2,000

Over $200,000

Your credit will be phased out again by $50 for every $1,000 of income over $200,000 all the way to $0

Single or Married Filing Separately

Less than $75,000

You are entitled to the full credit ($3,600 or $3,000 depending on your child’s age)

Between $75,000 and $200,000

Your credit will be phased out by $50 for every $1,000 over $75,000 but will be at least $2,000

Over $200,000

Your credit will be phased out again by $50 for every $1,000 of income over $200,000 all the way to $0

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