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Will child tax credit payments affect your 2022 taxes? Here's what you need to know

You may unexpectedly have to repay some of your monthly child tax credit payments back in 2022 if you get too much money from the IRS this year.

$300 in $100 bills

If you claim the child tax credit for fewer dependents in 2021 than you did in 2020, that could result in an IRS overpayment. 

Sarah Tew/CNET

You may be concerned about owing money on your taxes next year if you've received both rounds of the child tax credit payments so far. Each child could qualify for up to $3,600 total, and families are getting the first half of the credit as monthly installments through December. But what do these advance payments mean for next year's taxes? Does accepting the money now mean an unwelcome tax surprise in the spring? 

The IRS bases this year's monthly payment amounts on your 2019 or 2020 tax return. There's plenty that could change between tax seasons -- for instance, an income increase or a kid aging out of an eligibility bracket. That could result in an "overpayment," which could mean you'll owe money to the IRS when an adjustment is made on your 2021 return. One way to prevent that from happening is to update your household details online. Sometime this month, a portal designated for the child tax credit should allow you to do so. 

If you don't want to wait, the best way to avoid potentially owing the IRS money is to opt out of advance payments -- here's how. With so many moving parts, it can get confusing fast, but the IRS has resources to help you check your eligibility, unenroll from the monthly checks and more. We'll explain how to estimate how much money you'll get, how you can prepare now and what non-tax-filing parents should know about the credit so they can register for payments. This story was recently updated. 

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Will I owe the IRS money for this year's child tax credit checks?

The short answer is no, but you still need to know some financial details. Child tax credit checks don't count as income, so you won't have to pay income tax 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."

While you won't pay taxes in 2022 on the payments you receive this year, you still may need to repay the IRS some part of the advance payment when you file your income tax return in 2022. 

Will I have to return the money if I get more than I'm supposed to?

Maybe. Unless you unenroll from or opt out of the monthly child tax credit payments, you'll automatically get half of your estimated amount this year from the IRS. Forgoing the monthly payments means that instead of receiving smaller installments, you will simply collect your money when you file your tax return in 2022.

If for whatever reason you wind up getting more child tax credit money than you actually qualify for because of outdated household details, you might need to repay some of the money to the IRS next year. That could be the case in the following scenarios:

  • If someone in your household ends up getting a better-paying job this year, increasing the adjusted gross income and pushing you above or out of a previous income bracket.
  • If one of your dependents ages out of an age bracket sometime this year. For example, if your 5-year-old turns 6 in 2021, that would qualify you for a smaller payment. Or if your 17-year-old turns 18 in 2021, you would no longer be eligible for the monthly payments.
  • If there is a change in custody. Two examples: if parents divorce and have a shared custody arrangement, or if the parent with custody changes from one year to the next. In a joint custody situation, only one parent can claim the credit for a given child.
  • If your main home was in the US for more than half of 2020, but not in 2021, which means you'd no longer qualify for payments.

Those kinds of changes in circumstances are a big part of why the IRS is giving folks the chance to opt out of the advance payments.

How can I make sure I don't owe the IRS money next year?

To reduce your chance of receiving an overpayment this year, sometime in September you'll be able to update the IRS with your current family status using the child tax credit portal. (The update categories for marital status, dependents and income aren't yet available, but they will be soon.) You should continue to keep the IRS up to date with family changes through the end of 2021.

Know that if your household's adjusted gross income, or AGI, for 2021 is 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. This is what the IRS calls "repayment protection" so that lower-income families won't be on the hook to repay money. Above a certain income level, the amount you need to repay increases, or phases in, until you owe full repayment.

A letter the IRS will send you in January 2022 will help you determine if you received an overpayment and if you need to repay all or part of the advance payments. See below for more on that letter.

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

Will I have to report my total child tax credit payments when I file taxes next year?

Yes. In January 2022, the IRS will 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 -- as 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 using the Child Tax Credit Update Portal later this summer. You can also change your address through the Postal Service.

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You'll receive the second half of your child tax credit money when you file your taxes next year. 

Sarah Tew/CNET

Will I receive more child tax credit money in 2022 with my tax refund?

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.

Does child tax credit money affect other federal benefit amounts?

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 are 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.

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