If I receive the child tax credit that starts in July, will that lower my tax refund by $3,000 next year?

[DoninGA]

The advance child tax credit you receive starting in July 2021will reduce the CTC you claim on your 2021 tax return by half for each child who receives the advance credit.

[kwoolf05]

So if I have two children, how much less will my tax refund be from 2021? It’s not been clear that this is basically an advance off of 2021 and what we claim for each child. 

[DoninGA]

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@kwoolf05 wrote:

So if I have two children, how much less will my tax refund be from 2021? It’s not been clear that this is basically an advance off of 2021 and what we claim for each child. 

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Eligible families will receive a payment of up to $300 per month for each child under age 6, and up to $250 per month for each child ages 6 through 17. The first monthly payment of the expanded and newly-advanceable Child Tax Credit will be made on July 15.

If each child is age 6 through age 17 then the credit on the 2021 tax return will be $3,000 each. 

The advance credit beginning in July 15, 2021 and through December 15, 2021 will be $250 a month for each child eligible.

So when you file your 2021 tax return the Child Tax Credit of $3,000 for each child will be reduced by the $1,500 advance credit you received for each child during calendar year 2021.

[Critter-3]

Ok folks ... here is the bottom line on the 2021 CTC situation.   

Old rules :  credit worth $2000 max per child but only $1400 was refundable (which means you get it in your refund if it was not needed to negate your federal taxes already)

New rules :  credit worth $3000 ($3600 if child is under 6) and all of it is refundable.  For 2021 only you can get 1/2 of the credit in advance which means it only leaves $1500 ($1800) on the return.  

So the difference is really only $100 ($400) in the refundable portion than in the past which is not a really big difference in the overall picture.   If you  choose to opt out of the advance you can and just get it on the return HOWEVER if you have any offsets then the ADVANCE payment cannot be taken but all of the credit on the tax return can be so if you have something that can grab at your refund you may want to get the advance payments  ...  https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-t...

[Opus 17]

Depending on your previous situation, the expanded credit means that you would receive at least $1000 more per child for 2021 then you received in 2020. If all your other tax facts (income and deductions) are basically the same, you would receive a $2000 larger refund.  Under some circumstances, your increased refund could be considerably more than $2000.

If you then accept the $300 per month per child advance payment from July through December, that will total $3600.  If we take into account that your base refund would be expected to be $2000 larger, it would reduce the advance credit would reduce your refund by $1600 compared to 2020.   

You can go to the IRS website and search for “advanced child tax credit“ and unenrolled from the advance payments if you prefer to receive the enhanced child tax credit as a lump sum in your tax refund.

[fanfare]

You shouldn't worry about it.

the congress is just throwing money around in the most complicated way it can come up with.

the carriage then turns back into a pumpkin in 2022 since all these changes are temporary.

[Hal_Al]

Q.  If I receive the child tax credit that starts in July, will that lower my tax refund by $3,000 next year?

A.  Simple answer: yes, because you have two  qualifying  kids.

But, as you can see by the other replies, taxes aren't simple.  So, "it depends".

[Frozen001]

OK So let me be more specific on my question by using an example:

Assumptions:

1) We typically get say a tax refund of $2,000

2) Our AGI remains the same from 2020 to 2021 tax year

Scenario:

 -  We chose to get the monthly advance with 2 children aged 8 and 12, so that equates to a $6,000 total credit which means the advance is $3,000 or $500 a month for the next 6 months. 

When we file our taxes,  what is the impact on our expected $2,000 return.  assuming nothing else is different

[Opus 17]

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@Frozen001 wrote:

OK So let me be more specific on my question by using an example:

Assumptions:

1) We typically get say a tax refund of $2,000

2) Our AGI remains the same from 2020 to 2021 tax year

Scenario:

 -  We chose to get the monthly advance with 2 children aged 8 and 12, so that equates to a $6,000 total credit which means the advance is $3,000 or $500 a month for the next 6 months. 

When we file our taxes,  what is the impact on our expected $2,000 return.  assuming nothing else is different

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One piece of information is missing, is your income earned from working high enough that you previously got the full $2000 per child credit, or was your credit limited because your earned income is low.  Check line 19 of your form 1040.

Assuming you previously got the full $2000 per child credit, you will see an increased credit of $1000 per child, or $2000 total.  If you get a $3000 advance (which is $1000 more than the increase) then the rest of your refund would go down by $1000.  

[fanfare]

Money now is worth more than money a year from now,

so you should take the 2021 monthly credits.