How will child tax credit payments affect your taxes in 2022?
Sarah Tew/CNET
Do you know if you’re eligible for child tax credit payments this year? It’s a good chance you are: As many as 92% of families with children will qualify for the money, which will be sent out July 15. But if you get payments this year, will that make tax time more costly next year when you file your federal income tax return?
If you qualify, you’ll automatically receive the first half of your advance payments in monthly installments beginning in July and ending in December. The remainder of your money will come when you file your taxes in 2022. But it’s not quite that simple, because you’ll need to do some math when you file to see if you received too much or too little.
We’ll explain what you need to know about how the child tax credit payments may affect your taxes in 2022 and what you’ll need to do when you file next tax season. For more, here’s what to do if you aren’t normally required to file a tax return, three ways to know if you qualify for the child tax credit for the child tax credit and how to quickly estimate how much money you could get in all, now that the portals are open.
Watch this:
Child tax credit: Everything we know
4:17
Will I have to pay taxes next year on my child tax credit checks?
The short answer is no, but there are some financial details you still need to know. Child tax credit checks don’t count as income, so you won’t have to pay income taxes on the payments, Mark Jaeger, vice president of tax operations at TaxAct, told CNET.
The IRS refers to these checks as “advance” payments ahead of 2021 tax season. “That means you’re simply getting the payments sooner rather than waiting to receive that money when you file,” Jaeger said.
While you won’t pay taxes in 2022 on the payments you receive this year, that doesn’t mean you won’t need to repay the IRS some part of the “advance” payment when you file your income tax return in 2022. Read on for what you’ll need to do next year when you file.
Will I have to report my 2021 payments on my 2022 tax return?
Yes. Next year in January, the IRS intends to send families that received child tax credit payments a letter with the total amount of money they got in 2021. Hold on to this notice — which the IRS is calling Letter 6419 — you’ll need information from it when you file your 2021 tax return during next year’s tax season. (This is not the same letter that the IRS is sending this year about the payments.)
To make sure the IRS has your most recent mailing address, you’ll be able to update it through the Child Tax Credit Update Portal later this year, the IRS said. You can also change your address through the Postal Service.
Do I have to pay back any child tax credit money I receive?
Maybe. Unless you unenroll, or opt out, of the monthly child tax credit payments, you’ll get half of your estimated amount this year from the IRS. Foregoing the monthly payments means you’d get your share in one big check instead of seven smaller ones — six in 2021 and one in 2022.
No matter how you get your money, if for whatever reason you wind up getting paid more than you actually qualify for, you may need to repay some of the money. You’ll use information from the letter the IRS sends next January to calculate the difference when you file your tax return in 2022.
However, the IRS will use what it calls “repayment protection” so that lower-income families won’t be on the hook to repay money.
Income caps for repaying child tax credit payments
| Filing status | Qualify for full repayment protection | Repayment protection phases out |
|---|---|---|
| Single filer | Up to $40,000 | Over $80,000 |
| Filing as head of household | Up to $50,000 | Over $100,000 |
| Married filing a joint return | Up to $60,000 | Over $120,000 |
Most people won’t need to repay the IRS, Alison Flores, principal researcher from The Tax Institute at H&R Block, told CNET. “There is a repayment safety net for some people,” Flores said, “a protection for lower income taxpayers that will shield a majority of people who claim the child tax credit.”
If your adjusted gross income, or AGI, for 2021 is at or below a set income level, you likely won’t owe the IRS anything, even if you received more child tax credit money than you technically should have. Above this income level, the amount you need to repay increases, or phases in, until you owe a full repayment above a set cap.
The letter the IRS sends you in January will help you determine if you received an overpayment and if you need to repay all or part of the advance payments.
The IRS will estimate your payments using the most recent information it has on hand for you, using either your 2019 or 2020 tax return. To reduce the chance you receive an overpayment this year, update the IRS with your current family status using the child tax credit portal later this year and continue to keep the IRS up to date with family changes through the end of 2021.
Could I get more child tax credit money in 2022 when I file my tax return?
Yes. After you compare the information on the letter the IRS sends you in January 2022 with what you are eligible for, you may discover you are due more than you received in advance payments, based on your actual 2021 income. If that is the case, you can claim the remaining amount of your child tax credit when you file your return.
If you qualify, you can get monthly payments starting in July.
Sarah Tew/CNET
What if I opt out of the advance payments?
Now that the child tax credit portals are open, you’ll be able to unenroll from the monthly payments and instead claim your child tax credit when you file in 2022.
Will the child tax credit affect other federal benefits I receive?
According to the IRS, no. Because the advance child tax credit payments don’t count as income, federal, state or local agencies can’t use the amount when determining if you or your family is eligible for other benefits or assistance.
For more financial benefits this year, here’s how to save money on child care costs and health care expenses.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.