How Is the Child Tax Credit Calculated? Find Out Now

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The first round of monthly payments for the advance child tax credit, which is part of the stimulus relief bill, is slated to hit bank accounts on July 15. If you are eligible, you will receive a $250 or $300 payment per child, depending on the age of the child, automatically each month from July through December. Together, the six monthly payments will amount to half of your total benefit.

See: It’s Almost Child Tax Credit Time — Are You Eligible?
Find: When You Can Opt Out of Monthly Child Tax Credit Payments — And Why You Might Want To

Only those who are eligible will receive the full credit, while those beyond the parameters will be phased out to smaller amounts of money.

So how is the child tax credit calculated? In order to determine eligibility, you can use the IRS eligibility tool.

Here’s what the IRS will ask:

  • How many children ages five and under will you have by Dec. 31, 2021?
  • How many children ages six to 17 will you have by Dec. 31, 2021?
  • What was your adjusted gross income on your 2020 tax return?

See: Your 2021 Baby Makes You Eligible for the Child Tax Credit
Find: The Child Tax Credit Might Have to Be Paid Back – Unless You Take These Steps

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To be eligible for the full credit, you must meet the income thresholds of $75,000 adjusted gross income filing individually or $150,000 adjusted gross income filing jointly, which is why the IRS asks the question. The questions regarding the ages of the children further determine how much money you can receive.

For every child under six years of age (so five and younger), you can receive $3,600. For every child age six to 17, you can receive a total credit of $3,000. 

See: Why Your Child Tax Credit Might Be Lower This Year
Find: 6 Tips for Getting Your Kids Involved in the Family Budget This Year

The IRS will also ask you if you claimed the child tax credit on your 2020 or 2019 tax return. If not, you will not be eligible to claim this credit, as the eligibility is based on your last year’s taxes. That being said, this particular credit is fully refundable, which means even if you paid no taxes at all or are a non-filer, you can still claim the full benefit amount if you have qualifying children.

If you typically aren’t required to file a tax return, you can claim the credit by using the non-filer tax tool set up by the IRS for the specific purpose of having non-filers register for this new child tax credit.

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Last updated: July 12, 2021

About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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