Child Tax Credit: What It Is and How to Claim

The child tax credit is a tax benefit granted to American taxpayers for each qualifying dependent child. Taking advantage of the child tax credit each year can be important to support you and your family members each year. Money received from the child tax credit can be put towards food, housing, and insurance premiums.

Mira offers a health benefits membership for $45 per month, including discounts on health costs that would normally be expensive when paid out-of-pocket. Mira’s membership includes $99 urgent care visits, up to 80% off prescriptions, and same-day laboratory tests. Sign up and start saving money on healthcare expenses today.

What the Child Tax Credit Is

The Child Tax Credit is a federal tax relief initiative that decreases taxpayer liability by a certain increment per child registered as a dependent of their parents. This credit is only available for low to middle-income families and is phased out for higher-income families. The high-income threshold of gross income is $150,000 for a joint tax return (couples).

The usual tax credit received per dependent child (under the age of 17) is $2,000. Because of the hardships of COVID-19, the tax credit received was increased to $3,000 for children under age 18 and $3,600 for children under age 6 for the fiscal year of 2021. 

Under the current federal administration, all Child Tax Credits are now refundable. This means that the taxpayer receives all excess credit if the accumulated credit is greater than the accumulated tax owed.

Unless extended by legislative action or executive order, tax credits will revert to the amount received in 2020. President Biden has proposed the American Families Plan, which will extend the same tax credit from 2021 through the fiscal year 2025.

In 2021, the Internal Revenue Service (IRS) began distributing the tax credits in monthly increments of $250 for dependents under the age of 18 and $300 for dependents under 6. This is known as the Advance Child Tax Credit. These tax credits are often available via direct deposit.