2021 Lookback rule

[goldengirl]

I had earned i come for 2019 but no earned income for 2020. I have only received unemployment in 2020. Can i use the look back rule to claim child tax credits?

[Cynthiad66]

Yes.  

To use the lookback feature for the Child Tax credit in TurboTax Online, go to the Child Tax credit section. 

1. In the Search box on the top right of your screen, enter child tax credit and click on Find at the right
2. In the search result box, click on Jump to child tax credit

1. In this section, follow the interview until you arrive at a page titled Do you want to use last year's earned income? Note down your Earned Income tax credit using your 2020 earned income.

1. Click on the radio button Yes and enter your 2019 earned income and click Continue
2. TurboTax will give you your new child tax credit using your 2019 earned income
3. If the new credit is higher, click Continue to accept it
4. If the new credit is lower, click Back to go back to the previous screen and click the radio button No then click Continue.

This is a very important provision which has the potential to help workers who experienced lower income in 2020, or received unemployment income in lieu of their regular wages, get bigger tax credits and larger refunds in the coming year.

The special lookback rule will allow lower income individuals to use their earned income from 2019 to determine their Earned Income Tax Credit and the refundable portion of the Child Tax Credit in 2020, since their lower 2020 income could reduce the amount they are eligible for.

The Earned Income Tax Credit is the country’s largest program for working people with low to moderate income. More than 25 million eligible tax filers received federal Earned Income Tax Credit last tax season and the average Earned Income Tax Credit was $2,476 per filer.

With this new “lookback” rule, you can choose to use your 2019 earned income information to determine your eligibility for the Earned Income Credit and the Additional Child Tax Credit if your 2020 earned income is lower than your 2019 earned income and doing so results in a larger credit.

The Earned Income Credit (EITC) is calculated based on a percentage of your earned income, and other factors impact the credit calculation such as the number of qualifying children you have and your AGI.

The Child Tax Credit is calculated based on a percentage of your earned income over $2,500, and other factors impact the credit calculation.

Lookback Rule details:  The Look Back Rule for Child Tax Credit