2021 Child Tax Credit, Dependent Care, and EITC

Update May 2022: The timeframe for receiving advance payments of the Child Tax Credit (CTC) during 2021 has expired. The Child Tax Credit Update Portal and Child Tax Credit Non-filer Sign-up Tool, mentioned in this section, have now been closed and are unavailable. Note: All taxpayers who received advance payment(s) of this credit, must file a tax return, to claim the CTC and reconcile the amount they received in advance versus the total amount for which they qualify. This will be required whether you have a regular requirement to file a tax return or not.

To claim the 2021 Child Tax Credit, see IRS’s Child Tax Credit page for more information. Puerto Rican residents, should see IRS provides guidance for residents of Puerto Rico to claim the Child Tax Credit for special instructions.

The American Rescue Plan Act (ARPA) of 2021 made important changes to the Child Tax Credit (CTC) for tax year 2021 only. Basic changes include:

• The credit amounts will increase for many taxpayers. The maximum Child Tax Credit increased to $3,600 for children under the age of 6 and to $3,000 per child for children between ages 6 and 17.
• The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
• The credit will include children who turn age 17 in 2021.
• Certain taxpayers may receive part of their credit in 2021 before filing their 2021 tax return during the 2022 tax filing season.

For tax year 2021, the ARPA temporarily increased the maximum amount of work-related expenses for qualifying care that may be taken into account in calculating the child and dependent care credit, increased the maximum percentage of those expenses for which the credit may be taken, modified how the credit is reduced for higher earners, and made it refundable.

Credit amounts

For 2021, eligible taxpayers can claim qualifying work-related expenses up to:

• $8,000 for one qualifying person, up from $3,000 in prior years, or
• $16,000 for two or more qualifying persons, up from $6,000 in prior years.

Combined with the increase to 50 percent in the maximum credit rate, taxpayers with the maximum amount of qualifying work-related expenses would receive a maximum credit of $4,000 for one qualifying person, or $8,000 for two or more qualifying persons. When calculating the credit, a taxpayer must subtract employer-provided dependent care benefits, such as those provided through a flexible spending account, from total work-related expenses.

Qualifying information

• Taxpayers are required to have earnings; the amount of qualifying work-related expenses claimed cannot exceed a taxpayer’s earnings. For more information, see Work-related expenses (Q18-Q23).
• A taxpayer (or the taxpayer’s spouse if filing a joint return) must reside in the United States for more than half of the year. However, special rules apply to military personnel stationed outside of the United States, see Q15, for more information.
• A qualifying person generally is a dependent under the age of 13, or a dependent of any age or spouse who is incapable of self-care and who lives with the taxpayer for more than half of the year.
• A valid taxpayer identification number (TIN) for each qualifying person.

Families with incomes up to $125,000 are eligible for the full credit, after which the percentage of expenses that taxpayers can claim gradually decreases until it phases out at $438,000 in adjusted gross income.

The credit is fully refundable for the first time in 2021. This means an eligible taxpayer can receive it, even if they owe no federal income tax.

Claiming the credit

• To claim the credit for 2021, follow the instructions for Form 1040, U.S Individual Income Tax Return; Form 1040-SR, U.S. Tax Return for Seniors; or Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

For more Child and Dependent Care Credit information, see:

• Claiming the Credit
• Form 2441, Child and Dependent Care Expenses
• Tax Topic 602 – Child and Dependent Care Credit
• Publication 503, Child and Dependent Care Expenses

Section 9621 of the ARPA temporarily expands EITC eligibility and increases the amount of the credit for taxpayers with no qualifying children. For the 2021 taxable year only, in the case of the credit for a taxpayer with no qualifying children, the minimum age is reduced from 25 to 19. However, if the individual is a specified student, the minimum age is reduced from 25 to 24. The provision further reduces the minimum age to 18 for any qualified former foster youth or qualified homeless youth. The upper age limit on the credit for taxpayers with no qualifying children is temporarily removed for the 2021 taxable year only.

The provision increases for 2021 the amount of the credit for taxpayers with no qualifying children. The credit percentage and phaseout percentage are increased from 7.65 percent to 15.3 percent. In addition, the earned income amount is increased to $9,820, and the beginning of the phaseout range for non-joint filers is increased to $11,610 ($17,550 if married filing jointly).

Other provisions of Section 9621 apply to taxable years beginning after December 31, 2020.

• Section 9622 repeals the rule that an eligible taxpayer with at least one qualifying child who does not claim the EITC with respect to one or more qualifying children due to failure to meet the identification requirements—including the valid SSN requirement—with respect to such children may not claim the EITC for taxpayers with no qualifying children.
• Section 9623 provides that an otherwise married individual separated from the individual’s spouse is treated as not married for purposes of the EITC if a joint return is not filed. The provision applies only if the taxpayer lives with a qualifying child of the taxpayer for more than one-half of the taxable year and either:

(1) Does not have the same principal place of abode as the individual’s spouse during the last six months of the taxable year, or
(2) Both

• Has a decree, instrument, or agreement (other than a decree of divorce) described in Code section 121(d)(3)(C)145 with respect to the individual’s spouse, and
• Is not a member of the same household with the individual’s spouse by the end of the taxable year.

Claiming the credit

• To claim the credit for 2021, follow the instructions for Form 1040, U.S Individual Income Tax Return; Form 1040-SR, U.S. Tax Return for Seniors; or Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

For more information about EITC, see:

• Claiming the Earned Income Tax Credit (TAS)
• Earned Income Tax Credit (EITC) (IRS)