The Child Tax Credit expanded in 2021, then returned to its previous form in 2022

Congress passed a temporary expansion of the Child Tax Credit as part of the American Rescue Plan in March 2021. That expansion increased the credit from $2,000 per child to $3,600 for children under age 6 and $3,000 for children ages 6 to 17. It also made the credit partially refundable, meaning families could receive money back even if they owed no taxes. The expansion lasted only through the end of 2021.

Starting in 2022, the credit reverted to $2,000 per child and returned to its previous rules. Congress did not pass legislation to extend the expanded version beyond 2021, so the higher amounts and the enhanced refundability ended. The credit still exists and is still available to families who meet the income limits, but at the lower 2017 amount.

Key Takeaways

  • The Child Tax Credit was expanded to $3,600 or $3,000 per child for 2021 only, then dropped back to $2,000 per child starting in 2022.
  • The 2021 expansion made the credit partially refundable, meaning some families received payments even if they owed no federal income tax.
  • Congress has not passed a bill to restore the expanded credit since it expired at the end of 2021.
  • Families can still claim the $2,000 credit on their 2024 and 2025 tax returns if they meet income and residency requirements.

How the 2021 expansion worked

During 2021, the IRS sent monthly payments to families with children under 18. These payments were advance distributions of the expanded Child Tax Credit. Families with one child received up to $300 per month (for children under 6) or $250 per month (for children 6 to 17). The payments were based on income and family size, and the IRS used 2020 tax return data to determine who received them.

Families could opt out of the monthly payments if they preferred to claim the full credit on their 2021 tax return instead. Some families did this because receiving advance payments meant a smaller refund when they filed taxes in 2022. The monthly payments stopped in December 2021, and families then claimed any remaining credit amount when they filed their 2021 taxes.

What changed in 2022 and beyond

The Child Tax Credit returned to $2,000 per child starting with the 2022 tax year. It is no longer partially refundable, which means families must owe at least some federal income tax to benefit from the full credit. The credit is still available, but the amount is lower and the rules are stricter about who can receive a refund.

The credit remains available for 2024 and 2025 tax returns. Income limits apply: the credit begins to phase out at $400,000 of modified adjusted gross income for married couples filing jointly and $200,000 for single filers. Families must have a valid Social Security number for each child and claim them as dependents on their tax return.

Why the expansion ended

The American Rescue Plan was a one-time relief package passed in response to the COVID-19 pandemic. Congress wrote the expansion to last only through 2021 and did not include language to make it permanent. Extending the expanded credit would have required a separate vote and new legislation.

Several proposals to extend or restore the expanded credit have been introduced in Congress since 2021, but none have passed both chambers and been signed into law. The credit remains at the $2,000 level that was set in the 2017 Tax Cuts and Jobs Act.

How to claim the credit on your tax return

You claim the Child Tax Credit by filing Form 1040 and Schedule 8812 (or Form 1040-SR if you are age 65 or older). You will need the Social Security number for each child, their relationship to you, and the number of months they lived with you during the year. The IRS will calculate the credit amount based on your income and the number of may have access to children.

If you received advance payments in 2021, you will need to account for those when you file your 2021 tax return. Form 6419 shows the amount of advance payments you received. If you received more than you were may have access to to based on your actual 2021 income, you may owe money back when you file. If you received less, you can claim the difference as a credit.

Income limits and phase-out rules

The credit phases out for higher-income families. For 2024, the phase-out begins at $400,000 of modified adjusted gross income for married couples filing jointly, $200,000 for single filers, and $200,000 for heads of household. For each $1,000 (or fraction thereof) of income above the threshold, the credit reduces by $50.

Modified adjusted gross income is usually your regular adjusted gross income, but some types of income are added back for this calculation. If you are unsure whether you are over the limit, the IRS worksheet on Schedule 8812 will walk you through the calculation. Your tax software will also calculate this automatically if you enter your income and number of children.

Frequently Asked Questions

Can I still get the $3,600 credit if I have a young child?

No. The $3,600 credit was only available for 2021. Starting in 2022, the credit is $2,000 per child regardless of age. Congress has not passed legislation to restore the higher amount, so the $2,000 credit is what is currently available for 2024 and 2025 tax returns.

Do I have to pay back the advance payments I received in 2021?

Only if you received more than you were may have access to to based on your actual 2021 income. When you file your 2021 tax return, the IRS compares the advance payments you received to the credit you actually may have access to for. If there is a difference, it is settled on your return — either you owe money back or you receive an additional refund.

What if my income changed after I received the 2021 advance payments?

The advance payments were based on your 2020 tax return. If your 2021 income was different, your actual credit amount may be different. When you file your 2021 tax return, you report your actual 2021 income, and the IRS recalculates the credit. Any overpayment is subtracted from your refund, or any underpayment is added to it.

Is there any way to get the expanded credit back?

Only if Congress passes new legislation. Several bills have been introduced to restore the expanded credit, but none have become law. You can contact your representatives to express your views, but the credit amount for current tax years remains at $2,000 per child.