The Child Tax Credit: What Is It And How To Use It?

Last Updated on January 31, 2024 by Lori Pace

American taxpayers have entitled to the Kid Tax Credit for each eligible dependent child. The American Rescue Plan Act of 2021 significantly increased this credit, which was created to assist taxpayers in providing for their families. Maybe it will be a good help to your hardship loans for poor credit to improve the financial situation of the family.

The American Rescue Plan Act of 2021 substantially enhanced this credit, which was created to assist taxpayers in providing for their families.

The Internal Revenue Service (IRS) will also start giving qualified taxpayers the Child Tax Credit in advance payments on a monthly basis starting in July 2021. Parents don’t have to owe taxes in order to get it because it is entirely refundable.

To Whom Does The Child Tax Credit Apply?

When filing their taxes in 2023, taxpayers have until April 17, 2022, to claim the child tax credit. Understanding whether children qualify and any additional requirements to be aware of is the first step in determining your eligibility for the credit. The American Rescue Plan’s Child Tax Credit offers working families the highest child tax credit in history as well as historic relief.

Typically, you and your eligible child must complete seven “tests” to be eligible.

  • Age: Your child had to be under the legal drinking age at the end of 2022.
  • Dependent status: You must be able to correctly list the youngster as a dependant on your tax return. Additionally, unless they do so to request a refund of withheld income taxes or anticipated taxes paid, the kid cannot submit a joint tax return.
  • Residency: The child you’re claiming must have spent at least half the year living with you (there are some exceptions to this rule).
  • Financial support: During the past year, you must have given the child at least half of what they needed to survive. In other words, if your qualifying child has been financially independent for longer than six months, they are probably not eligible.
  • Citizenship: According to the IRS, your child has to be a “U.S. citizen, U.S. national, or U.S. resident alien” and have a current Social Security number.
  • Income: In order to qualify for the credit, parents or carers must normally meet a minimum income threshold. The credit becomes gradually lowered until it is removed, depending on how much your income exceeds that limit.

Other Dependents Are Credited

Families with eligible dependents who are not eligible for the CTC are eligible for a $500 non-refundable credit. This also applies to minors who would otherwise be eligible for the CTC and who have an ITIN. Additionally, this credit may be claimed for eligible family members (such as dependent parents) and even unrelated dependents who reside with you.

This credit cannot be refunded, thus it may only be used to lower taxes due. If you qualify for both of these credits plus the CTC, the first one will be used to reduce your taxable income. The expected taxable employer firm income for the US social assistance industry in 2021 increased from the year before and was around 71.3 billion dollars.

Expected taxable employer firm income

How To Make A Child Tax Credit Claim

The CTC registration process consists of two parts. You have to file your 2020 taxes (which you file in 2021) or provide the IRS with your information through the 2021 Non-filer site in order to get the advance payments (this tool is now closed). You may still claim the entire credit if you didn’t sign up for advance payments by completing a 2021 tax return (which you file in 2022).

To collect the remaining half of your credit, even if you received payments on a monthly basis, you must file a tax return. You may find out how much money you received in advance in 2021 by reading Letter 6419, which the IRS mailed to you in January 2022. Finding your CTC amount may be done using either this letter or your IRS account. You might need to make reference to this notification when claiming your remaining CTC on your 2021 tax return, which you submit in 2022.

Background Of The Child Tax Credit

The CTC has undergone a number of adjustments throughout the years, much like other tax benefits. The Tax Cuts and Jobs Act, often known as the TCJA, established detailed guidelines for claiming the credit in 2017, which will be applicable from the 2018 tax year through the 2025 tax year. However, the credit was temporarily altered for the 2021 tax year by the American Rescue Plan Act of 2021 (the coronavirus relief law), which has raised questions about which modifications are long-term.

A brief history of it is provided here.

  • 1997: The Taxpayer Relief Act first offered the $500 nonrefundable credit.
  • 2001: The Economic Growth and Tax Relief Reconciliation Act raised the credit’s per-dependent limit to $1,000 and made it partly refundable.
  • 2017: Several adjustments to the credit were implemented, and they take effect from 2018 to 2025. As part of this, the credit cap was raised to $2,000 per dependant, a new income cutoff was established, and it was made sure that the partially refundable element of the credit was annually updated for inflation.
  • 2021: For the 2021 tax year alone, the American Rescue Plan Act temporarily changed the credit in a number of ways. This includes making the credit refundable, boosting the credit’s maximum amount to $3,600 per eligible child, and opening it up to 17-year-olds. Furthermore, for the first time in American history, many taxpayers got half of the credit in advance monthly payments from July through December 2021.
  • 2022-2025: The 2021 ARPA increases will no longer be in effect between 2022 and 2025, and the credit will after that operate on the TCJA’s original terms, which include the $2,000 maximum for each eligible kid.


The Child Tax Credit was enhanced under the American Rescue Plan from $2,000 to $3,000 per child for children over six years old and from $2,000 to $3,600 for children under six years old. Its age limit was also changed from 16 to 17. If a working family earns up to $150,000 as a couple or $112,500 as a family with a single parent, they will all be eligible for the full credit (also called Head of Household).

Lori Pace
Lori Pace

Lori Pace is a single mother of three daughters ages 7 and under. As a working mom from home, she balances kids, work and two crazy dogs with humor and love. Follow Lori as she honestly gives tips and advice based on her own experiences as a single mom!