The enhanced tax credit is part of the $1.9 trillion American Rescue Plan that President Joe Biden signed into law in March.
This new benefit is available to children 17 and under in families with 2020 adjusted gross income less than $75,000 for single parents and $150,000 for a married couple filing jointly.
The enhanced credit begins to phase out for taxpayers that have higher income and ends for individuals earning $95,000 and married couples filing jointly making $170,000.
But you should file a 2020 tax return
Filing a 2020 tax return is the only way to prove to the IRS that your child is eligible to receive the credit.
In addition to expanding the amount of money families will receive through the child tax credit, the American Rescue Plan also eliminates the minimum income necessary to be eligible for the CTC and makes it fully refundable.
If you can’t claim the full Child Tax Credit because you may owe the IRS, you may be able to claim the refundable Additional Child Tax Credit.
Families that do not qualify for the credit using these income limits are still eligible for the $2,000 per child credit using the original Child Tax Credit income and phase-out amounts.
But that’s not all, since the entire credit is fully refundable for 2021.
Before this year, the refundable portion was limited to $1,400 per child and there were other requirements regarding earned income to obtain the refundable portion. There is not an earned income requirement for 2021.
However you may need to file a 2020 tax return even if you don’t traditionally file.
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