Issue Number: COVID Tax Tip 2021-117
Common questions about the advance child tax credit payments
The advance child tax credit allows qualifying families to receive early payments of the tax credit many people may claim on their 2021 tax return during the 2022 tax filing season. The IRS will disburse these advance payments monthly through December 2021. Here some details to help people better understand these payments.
Who is a qualifying child for the purposes of the advance child tax credit payment.
For tax year 2021, a qualifying child is an individual who does not turn 18 before January 1, 2022, and meets these requirements:
- The individual is the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or a descendant such as a grandchild, niece, or nephew.
- The individual does not provide more than one-half of his or her own support during 2021.
- The individual lives with the taxpayer for more than one-half of tax year 2021. For exceptions to this requirement, see Publication 972, Child Tax Credit and Credit for Other Dependents.
- The individual is properly claimed as the taxpayer’s dependent. For more information about how to do this, see Publication 501, Dependents, Standard Deduction, and Filing Information.
- The individual does not file a joint return with the individual’s spouse for tax year 2021 or files it only to claim a refund of withheld income tax or estimated tax paid.
- The individual was a U.S. citizen, U.S. national, or U.S. resident alien. For more information on this condition, see Publication 519, S. Tax Guide for Aliens.
What should someone do if they don’t want to receive advance child tax credit payments?
Anyone who does not want to receive monthly advance child tax credit payments because they would rather claim the full credit when they file their 2021 tax return, or because they know they will not be eligible for the credit in 2021 can unenroll through the Child Tax Credit Update Portal. People can unenroll at any time, but deadlines apply each month for the update to take effect for the next payment.
For people married and filing jointly, they and their spouse must unenroll using the Child Tax Credit Update Portal. If only one person unenrolls, they will still receive half the normal payment. Similarly, if you are changing bank account information, both of you must make the update so both halves of your payment go to the new account.
Will receiving advance child tax credit payments affect other government benefits?
No. Advance child tax credit payments cannot be counted as income when determining if someone is eligible for benefits or assistance, or how much they can receive, under any federal, state or local program financed in whole or in part with federal funds. These programs cannot count advance child tax credit payments as a resource when determining eligibility for at least 12 months after payments are received.
Are advance child tax credit payments taxable?
No. These payments are not income and will not be reported as income on a taxpayer’s 2021 tax return. These payments are advance payments of a person’s tax year 2021 child tax credit.
However, the total amount of advance child tax credit payments someone receives is based on the IRS’s estimate of their 2021 child tax credit. Generally, the IRS uses information from previous tax returns to calculate a person’s estimate. If the total is greater than the child tax credit amount, they can claim on their 2021 tax return, they may have to repay the excess amount on their 2021 tax return. For example, if someone receives advance child tax credit payments for two qualifying children claimed on their 2020 tax return, but they no longer have qualifying children in 2021, the advance payments they received are added to their 2021 income tax unless they qualify for repayment protection.