Child Tax Credit Payments 2021: Who Is Eligible and How Much Are They?

The second monthly payments of the child tax credit hit Americans’ bank accounts earlier this month, continuing an experiment in family and fiscal policy. Democrats tout the monthly payments as a way to reduce child poverty and change annual lump-sum tax refunds into a more reliable stream of income. Republicans have criticized the changes for breaking the prior link between the credit and earned income.

The child tax credit is a federal benefit that reduces income tax liability for people with children. It was created in 1997 and since then has expanded several times. It is a credit that reduces taxes owed as opposed to a deduction that reduces taxable income. The temporary changes in effect for 2021 make it a near-universal monthly child allowance, far from the annual tax break it started as. The changes came about as part of the $1.9 trillion Covid-19 stimulus law passed in March.

Here is how it works.

How big is the credit?

Until 2021, the credit was $2,000 per child under age 17, based on the child’s age at the end of the year. For 2021 only, Congress increased the credit to $3,000 for children ages 6 to 17 and $3,600 for children under age 6.

Are there limits based on income?

On the low end, there were limits, but they have been removed for this year. Until 2021, low-income households that didn’t owe income taxes could get as much as $1,400 of the $2,000 credit. This year, they can get the full credit even if they have no income.