Do You Qualify for the Child Tax Credit If You Had a Baby in 2021?
Key takeaways:
The child tax credit is a benefit given to taxpayers who provide financial support to qualifying children and other dependents during the year.
Families may qualify for a tax credit of up to $3,600 if they had a baby in 2021.
Taxpayers with babies born as late as December 31 may still claim the credit on their 2021 tax return if they meet certain requirements.
The child tax credit is for taxpayers who claim a qualifying child as a dependent on their tax return. This credit is valuable for many taxpayers, offsetting any amount that a taxpayer may owe on their tax return. If the child meets certain criteria, the credit can reduce the taxpayer’s tax bill. It can even result in a tax refund.
Parents that had a child in 2021 can claim the child tax credit if they meet certain requirements. The American Rescue Plan Act expanded the credit, increasing the amount of the credit from $2,000 to $3,600 for babies born in 2021.
How does the child tax credit work?
The child tax credit is a benefit given to taxpayers who claim qualifying children on their tax return. This credit can reduce your tax liability — the amount you owe in taxes — dollar for dollar.
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Prior to 2021, the child tax credit was nonrefundable. This means if you had a $500 tax liability, you were only allowed to use $500 of the child tax credit. A nonrefundable tax credit can only reduce your bill to zero. It can’t give you a refund.
Any amount of your child tax credit that was not used was then turned into the additional child tax credit. This grants you access to up to $1,400 — per qualifying child — of refundable money.
For 2021, the child tax credit became more generous. The American Rescue Plan Act expanded the child tax credit to include the following benefits:
You can claim a maximum credit of $3,600 for children age 0 through 5.
The child tax credit is now refundable.
Families could opt into advance payments of the credit if they had a baby during 2021.
If you took advantage of the advance child tax credit payments in 2021, your family was allowed to receive 50% of your estimated credit from July through December.
For example: Let’s say you qualified for the full $3,600 child tax credit in 2021. You would be eligible to receive $1,800 in 2021 and $1,800 when you file your tax return. Here’s a sample payment schedule for individuals who started receiving advanced child tax credit payments in July 2021.
| Month | Maximum payment for children age 0 through 5 |
|---|---|
| July 2021 | $300 |
| August 2021 | $300 |
| September 2021 | $300 |
| October 2021 | $300 |
| November 2021 | $300 |
| December 2021 | $300 | File tax returns by April 18, 2022 | $1,800 |
If you did not receive advance payments of the child tax credit in 2021, you can receive the full $3,600 credit (if you qualify) when you file your tax return.
Can the parent of any baby born in 2021 claim the child tax credit?
Yes. Parents of any baby born in the U.S. during 2021 can claim the child tax credit. Parents do not need to have earned income or a job to claim the credit. If your baby was born any time in 2021, you are eligible to claim the credit.
Children who were born and died in 2021 are also eligible for the credit on their parent’s return. The parents will need to attach the child's birth and death certificate to their tax return to claim the child tax credit.
Nonbiological parents may also claim the child tax credit for their babies born in 2021. Foster parents will need a release from the state. The release authorizes the foster child’s Social Security number to be given to and used by their foster parents for income tax purposes. Families can work with their case worker to get this release and additional required information. Adoptive parents will need their adoption papers and the child’s birth certificate.
Who’s eligible for the child tax credit?
If you had a baby in 2021, you should review the list of eligibility requirements for the child tax credit. Here are a few of the requirements you must meet:
Taxpayers must have a qualifying child as defined by the IRS. This includes a son, daughter, or stepchild that does not provide more than half of their own financial support and is claimed as a dependent on the taxpayer’s return.
The child must be a U.S. citizen, national, or resident alien.
Taxpayer’s main home is located in the U.S. for more than half the year.
You must also meet income requirements to claim the child tax credit. An individual’s modified adjusted gross income (AGI) must be $75,000 or under (or $150,000 if married filing jointly) to claim the maximum credit of $3,600 for a newborn baby in 2021. If the modified AGI is above the threshold, the credit begins to phase out. For 2021, the credit phases out in two different steps. We will discuss this below.
If you’re a noncustodial parent, you may also claim the child tax credit. The other parent must grant you permission to claim the child. Only one person may claim the child each year and qualify for the child tax credit. They will need Form 8332, Release/Revocation of Release of Claim Exemption for Child by Custodial Parent. This form shows that the noncustodial parent has authorization to claim the child for the tax year(s) shown.
How do you claim the child tax credit?
You can claim the child tax credit on Schedule 8812, Credits for Qualifying Children and Other Dependents. This schedule is part of Form 1040, U.S. Individual Income Tax Return. Taxpayers will have to show proof that they are eligible to claim the credit. Some of the documents used to prove this are:
Social Security Card
Birth certificate
Proof of health insurance/medical expenses paid
Child care records
A complete list of documents that can help you claim the child tax credit is on Form 14815, Supporting Documents to Prove the Child Tax Credit (CTC) and Credit for Other Dependents (ODC) for 2018-2025.
Families that received advance payments in 2021 will need Letter 6419 to file their tax return. The IRS sent this letter to taxpayers from late December 2021 through January 2022. This letter will show the total amount of advanced payments made to you in 2021. It will also include how many qualifying children were used to calculate the payment.
Who’s eligible for advanced child tax credit payments?
Families with a main home in the U.S. and a qualifying child were eligible for the advanced child tax credit payments based on the modified AGI of their most recently filed return. If you filed your 2020 tax return, your eligibility for advanced payments was based on your 2020 modified AGI. If that information was not available, payments were made based on your 2019 modified AGI.
Eligible families were able to receive 50% of their estimated child tax credit in 2021. If you qualified for the full tax credit amount of $3,600 for your newborn baby, you could have received a total of $1,800 from July through December.
The table below shows who was eligible for the maximum monthly payment of $300 ($1,800 total advanced payment for 2021) based on their filing status and modified AGI.
| Tax filing status | Modified adjusted gross income (AGI) threshold for maximum credit amount |
|---|---|
| Married filing jointly/Qualified widower | < $150,000 |
| Head of household | < $112,500 |
| Single/Married filing separately | < $75,000 |
Source: IRS
If your modified AGI exceeds the amounts listed above, you will not qualify for the full $3,600 credit. Your maximum credit amount would be reduced — also known as phased out — to $2,000 per child.
For example: Let’s say your tax filing status is single. If your modified AGI is $200,000, your maximum credit would be $2,000 per child. That means you were eligible to receive $1,000 worth of advanced payments in 2021, which equals monthly payments of $166 from July through December.
If your 2021 modified AGI exceeds $400,000 for joint filers ($200,000 for all other filers), your maximum credit would fall below $2,000. The credit is reduced by $50 for each additional $1,000 over the phaseout amount. The credit is fully reduced to $0 when a family with a married filing jointly status has a modified AGI of $440,000 or a single/head of household family has a modified AGI of $240,000.
The IRS created a Child Tax Credit Update Portal where families could add more dependents and report any other changes. They could also use the portal to sign up for advanced payments of the child tax credit. This portal was set up in June 2021 and closed at the end of the year. The advanced payments were only for July through December 2021. If the advanced payments were not received last year, families can still claim the full amount of the credit when they file their 2021 tax return.
How much is the child tax credit worth?
Before 2021, the child tax credit was worth $2,000 for children age 0 through 16. The expansion has increased the amount for children age 0 through 5 and children ages 6 through 17. The chart below shows the maximum tax credit you can claim based on the child’s age:
| Child age | Maximum credit for 2021 |
|---|---|
| 0-5 | $3,600 |
| 6-17 | $3,000 |
Source: IRS
As stated above, you can not claim the full child tax credit amount if your modified AGI exceeds certain thresholds. You can only receive the full $3,600 for newborn babies if your modified AGI does not exceed $150,000 as a married couple filing jointly.
For example: The Jones family had a baby in 2021, and their modified AGI is $205,000. Their income exceeds the $150,000 threshold for the $3,600 credit. However, because they are still below the $400,000 modified AGI threshold, the Jones family can claim a maximum child tax credit of $2,000.
How long do you have to claim for the child tax credit?
You have 3 years to claim a refund from the child tax credit. This limit is set by the refund statute expiration date (RSED) and begins from the tax filing due date. After this date, you cannot claim any refundable credits. If you do not file your tax return by this time, you forfeit any refunds that you could have claimed by filing your taxes.
For example, you will need to file a 2021 return with refundable credits by April 15, 2025, to claim those credits.
The bottom line
The American Rescue Plan Act expanded the child tax credit for 2021 to provide more benefits to families. If you had a baby, you may qualify for a credit up to $3,600. Many families had the option of receiving advance payments of the child tax credit from July through December 2021. If you did not receive advance payments in 2021, you can claim the tax credit when you file your tax return. Review the modified AGI thresholds to determine if you qualify. You will also need proper documentation for the child to claim the credit.
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References
Internal Revenue Service. (2018). Form 8332: Release/revocation of release of claim exemption for child by custodial parent.
Internal Revenue Service. (2019). Form 14815: Supporting documents to prove the child tax credit (CTC) and credit for other dependents (ODC) for 2018-2025.
Internal Revenue Service. (2021). 2020 instructions for schedule 8812.
Internal Revenue Service. (2021). Form 1040: U.S. individual income tax return.
Internal Revenue Service. (2021). Publication 972: Child tax credit and credit for other dependents.
Internal Revenue Service. (2021). Schedule 8812: Credits for qualifying children and other dependents.
Internal Revenue Service. (2022). Child tax credit update portal.
Internal Revenue Service. (2022). Definition of adjusted gross income.
Internal Revenue Service. (2022). Fact sheet.
Internal Revenue Service. (2022). Topic no. 160 statute expiration date - RSED | ASED | CSED.
Internal Revenue Service. (2022). Understanding your letter 6419.
This article is solely for informational purposes. This article is not professional advice concerning insurance, financial, accounting, tax, or legal matters. All content herein is provided “as is” without any representations or warranties, express or implied. Always consult an appropriate professional when you have specific questions about any insurance, financial, or legal matter.
