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Additional Child Tax Credit

Candlefocus Editor
The Additional Child Tax Credit (ACTC) was a valuable tax benefit for parents and guardians of qualifying children. The credit, which had been available for tax years 1998 through 2017, helped reduce the amount of tax owed on a qualifying dependent’s behalf by up to $1,000. Families with qualifying children who owed less than that amount were eligible to receive a refundable credit known as the Additional Child Tax Credit.

Before the Tax Cuts and Jobs Act (TCJA) came into effect in 2018, the ACTC was a refundable tax credit available to families with qualifying children. A family that owed the IRS less than its qualified Child Tax Credit amount could then claim the ACTC by filing Form 1040 or Form 1040A.

Under the TCJA, the ACTC was eliminated for tax years 2018 through 2025. In 2021, however, the Child Tax Credit—of which the ACTC was a component—was made fully refundable as part of the American Rescue Plan. This means that families with qualifying children can now get the entire Child Tax Credit, up to $3,000 per eligible child under the age of 6 and up to $2,000 per eligible child ages 6-17, regardless of their tax liability.

For 2021, it is possible to receive advance payments on half of the 2021 Child Tax Credit. These payments are issued on a monthly basis, based on your 2020 income. The other half of the credit can be claimed when you file your 2021 taxes.

Overall, the ACTC was an important tax benefit for families with qualifying children, providing an additional $1,000 in tax refunds or wittled-down living expenses to those who were eligible. While it was temporarily removed in 2018, it helps to know that this credit, in the form of the monthly advance payments offered through the new Child Tax Credit structure, is alive and well again in 2021.

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