Deductions & credits

Hi, great question!  Your step son would need to be on your 2021 tax return as your dependent to qualify for the Child Tax Credit.  Since you know he will not be your dependent on your 2021 tax return you may choose to unenroll from receiving the advance Child Tax Credit payments.  The IRS has a tool to unenroll.  You will need to unroll by August 2.

https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

You will reconcile your 2021 Child Tax Credit to your advance Child Tax Credits on your 2021 tax return.  You may be eligible for repayment protection. 

 Your repayment protection amount will decrease based on how much your modified adjusted gross income (AGI) is greater than the following amounts based on the filing status on your 2021 tax return:

• $60,000 if you are married and filing a joint return or if filing as a qualifying widow or widower;
• $50,000 if you are filing as head of household; and
• $40,000 if you are a single filer or are married and filing a separate return.

This repayment protection amount is then phased out – or reduced – as your modified AGI exceeds the amount above. Your repayment protection amount will equal $0 and your repayment amount will not be reduced when your modified AGI is at or above this higher amount based on the filing status on your 2021 tax return:

• $120,000 if married and filing a joint return or if filing as a qualifying widow or widower;
• $100,000 if filing as head of household; or
• $80,000 if you are a single filer or are married and filing a separate return.

Example: You filed a joint return with your spouse for tax year 2020 and properly claimed the Child Tax Credit for three qualifying children. The IRS estimated your total advance Child Tax Credit payment amount based on these qualifying children. However, when you file your 2021 joint tax return with a modified AGI of $75,000, you claim the Child Tax Credit for only one qualifying child – and therefore have two excess qualifying children. Your modified AGI of $75,000 exceeds your applicable $60,000 modified AGI threshold by 25 percent. Your potential full repayment protection amount of $4,000 (that is, $2,000 for each excess qualifying child) is reduced by 25 percent to $3,000.