The Child Tax Credit: Frequently Asked
Questions (FAQs) About the Child Credit for
2021 as Expanded by the American Rescue
Plan Act of 2021 (ARPA; P.L. 117-2)
Updated September 15, 2021
Congressional Research Service
https://crsreports.congress.gov
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n March of 2021, Congress passed legislation significantly expanding the child tax credit for
one year as part of the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2). ARPA
I expanded the eligibility for and the amount of the credit for 2021, especialy for low- and
middle-income taxpayers. The law also directed the Treasury Secretary to establish a program to
advance up to half of the total credit amount before 2021 income taxes are filed. This is a
departure from most other tax benefits, which are typical y delivered annual y in a lump sum after
federal income tax returns are filed.
The 117th Congress is considering proposals to extend and/or modify the temporary child credit
expansion included in APRA. In April 2021, House Ways and Means Committee Chairman
Richard Neal released a discussion draft of the Building an Economy for Families Act that
includes a provision to permanently extend the ARPA changes to the child credit.1 The Biden
Administration has proposed making the full refundability provision included in ARPA
permanent, while extending other ARPA provisions through the end of 2025.2
This report provides answers to selected frequently asked questions (FAQs) about the ARPA-
expanded child credit for 2021. Additional resources may be found in the report’s appendices:
 Appendix A: a selected compilation of research studies;
 Appendix B: a selected compilation of resources provided by Congress;
 Appendix C: a selected compilation of resources provided by Treasury and the
Internal Revenue Service (IRS);
 Appendix D: a detailed explanation of the safe harbor rules; and
 Appendix E: a reference table on the child credit in the U.S. territories.
A. American Rescue Plan Act of 2021 (ARPA; P.L.
117-2) Expansion of the Child Credit
A1. How did the child credit work before the ARPA expansion?
Prior to ARPA, the child tax credit al owed eligible taxpayers to reduce their federal income tax
liability by up to $2,000 per qualifying child. For example, a family with three qualifying children
could reduce their income tax liability by up to $6,000. A qualifying child was general y any
dependent child under 17 years old. The credit was reduced in value, or phased out, by $50 for
every $1,000 of income over $200,000 ($400,000 for married couples who filed joint tax
returns).3

1 See House Committee on Ways and Means, “ Chairman Neal Unveils Groundbreaking Proposal to Reshape the
American Economy,” press release, April 27, 2021, https://waysandmeans.house.gov/media-center/press-releases/
chairman-neal-unveils-groundbreaking-proposal-reshape-american-economy.
2 See U.S. Department of the Treasury, General Explanations of the Administration’s Fiscal Year 2022 Proposals, May
2021, https://home.treasury.gov/policy-issues/tax-policy/revenue-proposals; and CRS Insight IN11656, The Child Tax
Credit: How Would the Biden Administration’s Proposed American Families Plan Change the Child Tax Credit?
3 For the purposes of phasing out the child credit, income is defined as modified adjusted gross income (MAGI). Prior
to and after the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2), MAGI for the child credit equals adjusted
gross income (AGI) increased by foreign earned income of U.S. citizens abroad, including income earned in Guam,
American Samoa, the Northern Mariana Islands, and Puerto Rico. Hence, for most taxpayers, the incom e used to phase
out their child credit is their AGI.
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If a taxpayer’s income tax liability was less than the maximum value of the child tax credit, the
taxpayer was general y eligible to receive all or part of the difference as the refundable portion of
the credit. The refundable portion—the amount greater than income taxes owed—is referred to as
the additional child tax credit (ACTC) and was general y calculated using what is commonly
referred to as “the earned income formula.”4 Under the earned income formula, the ACTC
gradual y increased, or phased in, as earned income rose above $2,500. The maximum amount of
the ACTC was $1,400 per qualifying child. CRS estimates that about one in every five taxpayers
(19%) with a credit-eligible child had low incomes that resulted in them receiving less than the
maximum credit.5
After 2021, the ARPA expansion is scheduled to expire. The credit wil then revert to the prior-
law parameters described above, which were included in P.L. 115-97, commonly referred to as
the Tax Cuts and Jobs Act or TCJA. The TCJA modifications are scheduled to expire at the end of
2025 (see Table 1).6
Prior to ARPA, like other tax benefits, the child credit was received once a year after a taxpayer
filed their income tax return (i.e., as part of their income tax refund).
A2. How did ARPA change the child credit?
ARPA made three main changes to the child credit that may affect the credit amount for certain
taxpayers. The law also temporarily changed how the credit is being delivered. These changes are
temporary and in effect for one year—2021.
The three changes that may affect the credit amount for some taxpayers are as follows:
 Expanding eligibility to 17-year-olds: The law increased the maximum age for
an eligible child from 16 to 17.7
 Making the credit fully refundable: The law eliminated the ACTC phase-in
based on earned income and eliminated the ACTC cap of $1,400 per child.8
Hence, the child credit is “fully refundable” and the full value is available to
otherwise eligible taxpayers with no earned income (i.e., it is available to
taxpayers who do not work). Full refundability is general y only available to
taxpayers who live in the United States for at least half of 2021 (this is
sometimes referred to as the “principal place of abode requirement”).9
 Increasing the maximum credit amount, with larger increases for younger
children: The law increased the maximum amount of the credit from $2,000 per

4 All families with three or more qualifying children could also calculate the ACT C using an alternative formula. T he
alternative formula is the amount by which Social Security taxes paid exceed the ear ned income tax credit (EIT C) up to
the maximum refundable credit. T axpayers could claim whichever ACT C was larger—the ACT C calculated under the
earned income formula or under the alternative formula. But for most families who can calculate the ACT C under
either formula (i.e., families with three or more qualifying children) , the ACT C under the earned income formula was
larger than the ACT C under the alternative formula.
5 See Figure 1 in CRS Report R46502, The Child Tax Credit: Selected Legislative Proposals in the 116th Congress.
6 For more information on the current -law parameters of the child credit after 2025, see CRS Report R41873, The Child
Tax Credit: How It Works and Who Receives It.
7 T he age of the child for a given year’s child credit is based on their age on December 31 of that year. In other words,
for the 2021 child credit, a child who is 17 years old on December 31, 2021, is considered 17 ye ars old for the purposes
of the credit.
8 T he law also eliminated the calculation of the ACT C under the alternative formula. See footnote 4.
9 Full refundability is also available to taxpayers who are bona fide residents of Puerto Rico for 2021.
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child to $3,600 per child for a young child (0-5 years old) and $3,000 per child
for an older child (6-17 years old).
Full refundability and the larger maximum credit wil general y increase the credit amount for
low- and moderate-income taxpayers, as il ustrated in Figure 1 (low- and moderate-income
taxpayers may also receive a larger credit as a result of expanding the eligibility age to include
17-year-olds). Higher-income families wil general y receive the same benefit as under prior law
(although some with an eligible 17-year-old may also receive a larger credit).
Figure 1. Child Credit Amount by Income in 2021 Before and After ARPA
Unmarried Taxpayer with One Young Child

Source: CRS calculations based on Internal Revenue Code §24 and P.L. 117-2.
Notes: A stylized example assuming the taxpayer has one qualifying child and al income is earned income, with
no other sources of income and no above-the-line deductions claimed. Unmarried taxpayers with child credit-
qualifying children are assumed in this example to file as head of household. For more examples, see CRS Insight
IN11613, The Child Tax Credit: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L.
117-2).
General y, this increase in the maximum child credit—an increase of $1,600 per young child and
$1,000 per older child—phases out by $50 for every $1,000 over specified thresholds until the
credit amount equals the current-law maximum of $2,000 per child, as il ustrated in Figure 1.
These thresholds are $112,500 for head of household filers and $150,000 for married joint filers.10
The thresholds are sometimes referred to as the “first thresholds” or “ARPA thresholds.” (The
actual income level at which the credit phases down to $2,000 per child depends on the number
and age of qualifying children.) For many families, the credit then plateaus at its prior-law level

10 T his threshold also applies to surviving spouses as defined in IRC §2(a). In addition, taxpayers who file as married
filing separately or taxpayers who file as singles are subject to a $75,000 threshold. Single filers who can only claim a
child tax credit -qualifying child under IRC §152(e), but cannot claim that child under IRC §152(c) (and who have no
other dependents for tax purposes) generally may not file as a head of household.
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of $2,000 per child and phases out when income exceeds the current-law threshold of $200,000
($400,000 for married joint filers).11 These thresholds are sometimes referred to as the “second
thresholds” or “TCJA thresholds.” (The name is in reference to the law—commonly referred to as
the Tax Cuts and Jobs Act [TCJA; P.L. 115-97] that established these thresholds.)
ARPA also temporarily changed the way the credit is delivered, advancing half of the total 2021
credit in six monthly payments between July and December 2021 (see “B. Administration of the
ARPA-Expanded Child Credit”). The remaining half of the credit can be claimed on 2021 income
tax returns filed in 2022.
A3. What features of the credit were unchanged by ARPA?
Aside from changing the credit amount for some taxpayers and advancing a portion of the credit
(see “A2. How did ARPA change the child credit?”), ARPA general y left other parameters of the
credit unchanged. Notably, these include the definition of a qualifying child and the taxpayer ID
requirements of a qualifying child. Specifical y, a qualifying child must stil meet various
requirements including being related to the taxpayer (the relationship test) and living with the
taxpayer for more than half the year (the residency test). In addition, the taxpayer must provide a
qualifying child’s social security number (SSN) associated with work authorization in order to
receive the credit.12
A4: Can Americans living abroad receive the fully refundable child credit?
General y, no, although if they owe enough in income taxes they may stil benefit from other
aspects of the ARPA expansion. In order to receive the full amount of the ARPA-expanded credit
(and be eligible for the monthly advance payments of the credit in 2021), taxpayers must live in
the United States for more than half of 2021 (there is an exception for servicemembers, described
in “A5. Are servicemembers stationed overseas eligible for the ARPA-expanded child credit?”).13
Specifical y, full refundability only applies to taxpayers whose principal place of abode is the
United States for over half of 2021. Taxpayers who do not fulfill this requirement and receive
some of al of the credit in the form of the ACTC wil general y calculate the ACTC under the
earned income formula (15% of earned income above $2,500 not to exceed $1,400 per child).

11 T he law states that up until a taxpayer’s income reaches $75,000 if single, $112,500 if head of household, and
$150,000 if married filing jointly, they will receive the maximum child tax credit amount. T his amount is equal to
$3,600 multiplied by the number of qualifying children under six years old, plus $3,000 multiplied by the number of
qualifying children 6 to 17 years old. After this “ first threshold” (i.e., the “ ARPA threshold”), the credit amount begins
to phase down by $50 for each $1,000 over the threshold. T he amount by which the credit phases down is limited to the
lesser of (a) the “ applicable credit increase amount ” (the difference between the ARPA credit and the prior-law credit
in 2021) or (b) 5% of the “ applicable phaseout range” (the difference between the $200,000 and $400,000 phaseouts
enacted under the T CJA and the $75,000, $112,500, and $150,000 phaseouts in ARPA). Notably, 5% of the applicable
phaseout range equals $6,250 if single, $4,375 if head of household, and $12,500 if a married joint filer. After the total
credit has been phased down by the lesser of (a) or (b), it then remains at its pre -ARPA level until it is phased out again
under the pre-ARPA threshold of $200,000 or $400,000 if married filing jointly (also referred to as the “ T CJA
threshold”).
12 For more information, see “Definition of a Qualifying Child” in CRS Report R41873, The Child Tax Credit: How It
Works and Who Receives It.
13 Full refundability is also available to taxpayers who are bona fide residents of Puerto Rico for 2021. In the case of
the advance payments of the 2021 child credit, the IRS will determine if the taxpayer meets the principal place of abode
requirement for the reference year used to calculate the advance amount. In most cases the reference year is 2020, but if
a taxpayer has not filed a 2020 return, a 2019 return may be used.
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Among married joint filers, only one spouse must fulfil this principal place of abode
requirement.14
For example, if an otherwise eligible taxpayer lived outside the United States in 2021 with two
qualifying young children, they would be eligible for up to $7,200 in the 2021 child tax credit.
However, the maximum amount they could claim as the ACTC would be $2,800. If the taxpayer
had sufficient income tax liability, they could claim the difference ($4,400) as the nonrefundable
portion of the credit and stil receive the full benefit amount of $7,200.
A5. Are servicemembers stationed overseas eligible for the ARPA-expanded
child credit?
General y, yes. The principal place of abode requirement for the ARPA-expanded credit is defined
by reference to Internal Revenue Code (IRC) Section 32(c)(4), including the special military rule:
the principal place of abode of a member of the Armed Forces of the United States shal be
treated as in the United States during any period during which such member is stationed
outside the United States while serving on extended active duty with the Armed Forces of
the United States. For purposes of the preceding sentence, the term “extended active duty”
means any period of active duty pursuant to a call or order to such duty for a period in
excess of 90 days or for an indefinite period.
A6: Can noncitizens receive the ARPA-expanded child credit?
Yes, in certain cases. Eligibility for the child credit is not explicitly based on a taxpayer’s
citizenship status or on their qualifying child’s citizenship status. However, other parameters of
the credit may indirectly limit some noncitizens’ ability to receive al or some of the ARPA-
expanded credit. These parameters are briefly discussed below.
First, al taxpayers—citizens and noncitizens alike—must live in the United States for more than
half of 2021 in order to be eligible for the full refundability provision of the credit.15 (This is
sometimes referred to as the “principal place of abode” requirement for full refundability.)16
Second, under existing law, a qualifying child must be a U.S. citizen or U.S. national, and if not a
U.S. citizen or national, the child must reside in the United States.17 Final y, a taxpayer must

14 T he draft IRS Schedule 8812, Credits for Qualifying Children and Other Dependents, includes a question on line 13
asking if a taxpayer has a principal place of abode in the United States for more than half of 2021. See
https://www.irs.gov/pub/irs-dft/f1040s8—dft.pdf.
15 Full refundability is also available to taxpayers who are bona fide residents of Puerto Rico for 2021. Otherwise
eligible taxpayers—citizens and noncitizens alike—who do not satisfy this “ principal place of abode” requiremen t are
still eligible for the larger credit (up to $3,600 per young child and $3,000 per older child) and are still eligible to clai m
the credit for 17-year-olds. Hence, in cases where (1) the principal place of abode requirement is not met; (2) the credit
amount exceeds their income tax liability; and (3) the taxpayer is claiming some or all of the credit in the form of the
ACT C, then the taxpayer will calculate the ACT C using earned income (they may also calculate under the alternative
formula if that yields a larger ACT C). In other words, their ACT C will be calculated as 15% of earned income over
$2,500 up to $1,400 child.
16 Among married taxpayers who file a joint return, this “principal place of abode” requirement must be met by at least
one spouse. T axpayers who participate in the credit’s advanced payment program also must fulfill this principal place
of abode requirement as documented on their 2020 income tax return (or if those data are not available, their 2019
income tax return).
17 See IRC §24(c)(2). Children are considered to reside in the United States if they pass the tests to be considered a
resident alien for tax purposes. For more information, see the answer to question 1 in CRS Report R43840, Federal
Incom e Taxes and Noncitizens: Frequently Asked Questions. In addition, whereas all U.S. citizens are considered U.S.
nationals, not all nationals are considered citizens. Noncitizen U.S. nationals include persons born in certain U.S.
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provide an SSN for each qualifying child in order to claim the benefit.18 This SSN must be
associated with work authorization, meaning an SSN issued solely to receive a public benefit
does not qualify. These types of work-authorized SSNs are general y provided to al U.S. citizen
children and certain noncitizen children, including legal permanent residents (i.e., “green card
holders”), refugees, and asylees.19 Eligible taxpayers claiming the credit must provide either an
SSN or an individual taxpayer identification number (ITIN) to receive the credit. (Individuals
who are not eligible to receive an SSN are required to use an individual taxpayer identification
number [ITIN] when filing their tax returns and other documents with the IRS.20)
Hence, a noncitizen taxpayer who (1) lives in the United States for at least half of 2021; (2) has a
taxpayer ID (which can be either an SSN issued from the Social Security Administration or, if
ineligible for an SSN, an ITIN issued by the IRS); and (3) has a qualifying child with a work-
authorized SSN who is either a U.S. citizen or national or who resides in the United States for at
least half the year would general y be eligible for the ARPA-expanded child credit.
A7: Can unauthorized noncitizens (sometimes referred to as “undocumented
immigrants”) receive the ARPA-expanded child credit?21
Yes, in certain cases. For the purposes of the child credit, a taxpayer’s eligibility to claim the
credit is not based on their immigration status. Instead, any noncitizen, irrespective of their
immigration status, may general y be able to claim the ARPA-expanded child credit if
1. their principal place of abode for more than half of 2021 is the United States;
2. the taxpayer has either an SSN, or if they are ineligible for an SSN, an ITIN;
3. the taxpayer’s child meets al eligibility requirements including that they are a
U.S. citizen, a U.S. national, or a resident of the United States; and
4. the taxpayer’s qualifying child has an SSN associated with work authorization.
Hence, there could be cases where a noncitizen taxpayer who is “undocumented” or who is not
authorized to work in the United States could be eligible for the ARPA-expanded child credit. For
example, an “undocumented” noncitizen living in the United States with a U.S. citizen child
could be eligible for the ARPA-expanded child credit.
A8. How long are the ARPA changes in effect?
The ARPA changes to the child credit are only in effect for 2021 and only affect the credit as
claimed on 2021 income tax returns. The ARPA changes to the credit are themselves layered upon

territories, such as American Samoa.
18 According to a study by the Pew Research Center, “In 2016, 5.6 million children younger than 18 were living with
unauthorized immigrant parents. Of these, 675,000 were unauthorized immigrants themselves.” It is unclear what share
of those 675,000 children do not have SSNs, nor is it clear how these figures have changed over time. Nonetheless, this
estimate may provide a sense of the number of children who cannot be claimed for the child credit under existing
taxpayer ID requirements. Jeffrey Passel and D'Vera Cohn, U.S. Unauthorized Im m igrant Total Dips to Lowest Level in
a Decade, Pew Research Center, November 27, 2018, https://www.pewresearch.org/hispanic/2018/11/27/u-s-
unauthorized-immigrant -total-dips-to-lowest-level-in-a-decade/.
19 For more information, see Congressional Distribution Memorandum CD1321564, Noncitizen Eligibility for a Work-
Authorized Social Security Num ber (SSN).
20 For more information on individual taxpayer identification numbers (IT INs), see CRS Report R43840, Federal
Incom e Taxes and Noncitizens: Frequently Asked Questions.
21 Unauthorized noncitizens include those who have entered the United States without inspection or have overstayed
their period of lawful admission (overstays). For more information, see CRS In Focus IF11806, Citizenship and
Im m igration Statuses of the U.S. Foreign-Born Population.
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other changes in effect from 2018 through 2025, which were enacted by P.L. 115-97 (commonly
referred to as the Tax Cuts and Jobs Act or TCJA). Hence, after 2021, the credit is scheduled to
revert to prior-law TCJA parameters until 2025. After 2025, the credit would general y revert to
its pre-TCJA parameters under current law, as il ustrated in Table 1.
Table 1. Selected Parameters of the Child Tax Credit Under Current Law
Tax Years Beginning in 2021 or Later
Parameter
2021
2022-2025
2026-
Maximum Credit
$3,600 per child 0-5 $2,000 per child 0-
$1,000 per child 0-
years old
16 years old
16 years old

$3,000 per child 6-
17 years old
Maximum Credit
$3,600 per child 0-5 $1,400 per child 0-
$1,000 per child 0-
for Low-Income
years old
16 years old
16 years old
Taxpayers (the

refundable portion
$3,000 per child 6-
of the child credit,
17 years old
i.e., the additional
child tax credit, or
ACTC)
ACTC Formula
No formula; credit
15% of earned
15% of earned
is equal to fixed
income above
income above
amount per child
$2,500, not to
$3,000, not to
and is ful y
exceed $1,400 per
exceed $1,000 per
refundable.
child.
child.
Taxpayers with no
income tax liability
and no earned
income receive the
maximum amount.
Phaseout Threshold
First or “ARPA”
$400,000 MFJ
$110,000 MFJd
Threshold

(Phaseout of
Increased Credit)
$200,000 HOH &
$75,000 HOH &
othersc
otherse

$150,000 MFJa

$112,500 HOH

$75,000
othersb
Second or “TCJA”
Threshold (Phaseout
of Prior-Law Credit)

$400,000 MFJ

$200,000 HOH
& othersc
Child ID
SSN
SSN
SSN or individual
Requirements
taxpayer
identification
number (ITIN)
Maximum Child Age
17
16
16
(at the end of the
year)
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Parameter
2021
2022-2025
2026-
Method of Receipt
50% advanced;
Claimed on tax
Claimed on tax
remainder claimed
return
return
on tax return
Temporary
Yes, changes made
Yes, changes made
No
Modification in
by the TCJA (P.L.
by the TCJA (P.L.
Effect?
115-97) and ARPA
115-97) in effect
(P.L. 117-2) in effect
Source: CRS analysis of Internal Revenue Code (IRC) §24.
Notes: MFJ = married filing jointly; HOH = head of household. Tax years refer to the year(s) in which a
parameter is in effect. For most taxpayers, the 2021 tax year is calendar year 2021, and 2021 tax provisions,
including tax credits, are general y claimed on 2021 income tax returns, filed in 2022. In the case of the child
credit, at least 50% of the 2021 credit can be claimed on 2021 income tax returns.
a. This includes taxpayers who file as surviving spouses.
b. This includes married taxpayers who file separately and unmarried filers who cannot file as head of
household and file as single.
c. This includes married taxpayers who file separately, unmarried filers who cannot file as head of household
and file as single, and taxpayers who file as surviving spouses.
d. The threshold for married taxpayers who file separately is $55,000.
e. This includes taxpayers who file as single or as a surviving spouse. (See Internal Revenue Service, Publication
972, 2017, p. 3.)
A9. How much is the ARPA expansion of the child credit expected to cost (i.e.,
the budgetary impact)?
The Joint Committee on Taxation (JCT) estimates that the total cost of the one-year ARPA
expansion is $105.1 bil ion, of which $84.4 bil ion is attributed to the refundable portion of the
credit (i.e., the ACTC).22 This is in addition to the existing cost of the program before ARPA.
Prior to the ARPA expansion, the total cost of the child credit was $117.7 bil ion, according to the
IRS’s most recent data from 2018 tax returns.23
A10: How do taxpayers with children at different income levels benefit from
the ARPA-expanded child credit?
Estimates from the Tax Policy Center compiled in Table 2 suggest that the ARPA-expanded child
credit wil be a near universal y received benefit among taxpayers with children and provide the
largest benefit to the lowest-income taxpayers. Overal , the share of taxpayers with children

22 T he Joint Committee on T axation estimates that the total cost of the one-year ARPA expansion of the child credit is
$109.5 billion between FY2021 and FY2031, of which $88.8 billion is attributed to the refundable portion of the credit.
T hese estimates, however, also include the cost of the permanent extension of the child credit to residents of the
territories. Unlike residents of Puerto Rico, who are to apply directly for the child credit with the IRS, other territorial
residents are to apply for and receive the child credit from their territorial tax authority. The T reasury is to provide
these territorial governments with funds to cover these payments. T his permanent extension to the territories is
effective beginning in 2021 and so applies to the ARPA-expanded child credit. T he budgetary cost of this permanent
extension is $4.4 billion between FY2023 and FY2031, all of which is attributable to the refundable portion of the child
credit. T his amount is subtracted from the total cost to isolate the budgetar y costs of the one-year expansion. See Joint
Committee on T axation, Estim ated Revenue Effects Of H.R. 1319, The “Am erican Rescue Plan Act Of 2021,”
Scheduled For Consideration By The House Of Representatives On February 26, 2021 , February 12, 2021, JCX-12-21,
https://www.jct.gov/publications/2021/jcx-12-21.
23 Internal Revenue Service, Individual Complete Report (Publication 1304), Table 3.3 , Statistics of Income, 2018,
https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income.
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receiving the credit wil increase from 89.1% to 92.0%, with the largest gains occurring among
the lowest-income taxpayers (i.e., the share of such taxpayers receiving the credit wil increase
from 72.6% to 83.2%). In addition, the lowest-income 20% of taxpayers wil also see the largest
gains in income, both as a share of their after-tax income and in dollar terms. Specifical y, the
ARPA-expanded child credit wil equal 15.2% of after-tax income for the lowest-income
taxpayers ($4,490), compared to 5.6% of their after-tax income prior to ARPA ($1,220).
Table 2. Share of Taxpayers with Children Who Receive the Child Credit and Credit
Amount by Income Percentile in 2021, Before and After ARPA

BEFORE ARPA
AFTER ARPA
% of
% of
Taxpayers
Benefit as
Average
Taxpayers
Benefit as
Average
Who
% of After-
Benefit
Who
% of After-
Benefit
Income
Receive
Tax
per
Receive the
Tax
per
Percentilea
the Credit
income
Taxpayer
Credit
income
Taxpayer
Lowest 20%
72.6%
5.6%
$1,220
83.2%
15.2%
$4,490
Second-Lowest 20%
92.6%
5.8%
$2,560
94.1%
9.6%
$4,940
Middle 20%
97.2%
3.9%
$2,900
97.6%
5.9%
$4,890
Second-Highest 20%
99.2%
2.4%
$2,880
99.2%
3.6%
$4,650
Highest 20%
87.0%
0.7%
$2,140
87.2%
0.8%
$2,720
Al
89.1%
2.1%
$2,310
92.0%
3.8%
$4,380
Source: Tax Policy Center Tables T21-0043 and T21-0045, see Appendix A.
Notes: Includes filing and nonfiling taxpayers. Includes the $500 nonrefundable tax credit for other dependents.
Taxpayers with children are those claiming an exemption for children or with children qualifying for the Child
Tax Credit or EITC.
a. The income percentile classes used in this table are based on the income distribution for the entire
population and contain an equal number of people, not tax units. The breaks (in 2020 dol ars) are as
fol ows: 20%, $25,500; 40%, $51,000; 60%, $91,100; 80%, $164,300; 90%, $240,900; 95%, $341,700; 99%,
$799,100; 99.9%, $3,496,400.
B. Administration of the ARPA-Expanded Child
Credit
B1. How is the ARPA-expanded child credit being issued?
Unlike most tax benefits, which are received once a year as a lump sum after an income tax return
is filed, up to half of the 2021 child credit is being issued in advance of 2021 returns being filed.
ARPA directs the Treasury to issue half of the estimated 2021 credit in periodic payments
beginning after July 1, 2021 (these periodic payments wil general y be equal in amount).24 The
IRS is issuing these payments as monthly instal ments. Taxpayers can claim the remaining half of
the total 2021 credit when filing their 2021 income tax return in early 2022.

24 IRC §7527A.
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Like the expansion of the credit amount, the advance payment program is also temporary under
current law. Under ARPA, advance payments of the 2021 credit cannot be made before July 1,
2021, or after December 31, 2021.25
B2. How are the monthly advance payments being calculated?
Advance payments of the 2021 child credit are based on an estimate of the credit taxpayers are
eligible to claim on their 2021 income tax return. In order to estimate a taxpayer’s 2021 child
credit, the IRS wil use data from their 2020 income tax return, or if that is not available, data
from their 2019 income tax return. The year of data used to estimate the 2021 credit is sometimes
referred to as the “reference year.” Since up to half of the 2021 credit can be issued in advance,
the IRS wil general y calculate 50% of the estimated 2021 credit amount and then issue that in
monthly payments.
For example, if a married couple filing jointly listed $75,000 of income and two young children
on a 2020 return—and those children would also be young in 2021 (i.e., 0-5 years old)—the IRS
wil estimate their 2021 credit to be $7,200.26 The IRS would then issue half of that amount—
$3,600—in six monthly payments of $600, beginning July 15, 2021, and ending December 15,
2021.
B3. Can taxpayers opt out of the advance payment program?
Yes, taxpayers can opt out by using the IRS’s Child Tax Credit Update Portal (also referred to
simply as “the update portal” in this report, or CTC-UP by the IRS).27 Among married joint filers,
both spouses must opt out in order to stop al advance payments (otherwise half of the monthly
advance payments wil be issued to the spouse who has not opted out).28 Unless taxpayers opt out,
they are automatical y enrolled in the advance payment program.
Taxpayers may want to opt out of the advance payments if they prefer receiving the benefit as
part of their annual income tax refund. Taxpayers may also want to opt out if they are concerned
that they may receive more in advance payments than they are actual y eligible for. Broadly, this
can occur as a result of differences between information used to issue advanced payments (i.e.,
2020 or 2019 tax data) and information on their 2021 income tax return. Specifical y, it could
occur due to changes in a variety of factors between 2021 and the reference year used to calculate
the advance payments, including (a) large changes in income, (b) changes in the number of
qualifying children (including in cases were children live with a different divorced parent in

25 IRC §7527A(f).
26 See IRC §7527A(b)(1)(D). With respect to estimating the children’s ages in 2021 to estimate the advance, “the ages
of such children (and the status of such children as qualifying children) are determined for such taxable year by taking
into account the passage of time since the reference taxable year.” T he IRS already receives data from the SSA for tax
return processing purposes that includes children’s dates of birth, and hence their projected age by December 31, 2021,
can be determined.
27 T his tool is available at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.
28 See Question J6 “If I’m married filing jointly, does my spouse also need to unenroll?” and Question J7 “If my spouse
unenrolls and I don’t unenroll, what will happen?” on the IRS’s website. Internal Revenue Service, 2021 Child Tax
Credit and Advance Child Tax Credit Paym ents—Topic J: Unenrolling from Advance Paym ents, https://www.irs.gov/
credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit -payments-topic-j-unenrolling-from-advance-
payments.
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alternating years), (c) changes in marital status, and (d) changes in principal place of abode, or (e)
a combination of these changes.29
In cases where the sum of advance payments is greater than the credit the taxpayer is eligible to
claim on their 2021 income tax return, taxpayers may need to repay the excess, either by reducing
their refund or by remitting payment to the IRS (see “B9. Wil taxpayers need to pay back excess
amounts of the child credit?”).
B4. Will the monthly payment amounts be adjusted when the IRS receives
new information?
ARPA al ows the IRS to adjust monthly payments for new information, such that the total
advance a taxpayer receives is 50% of their 2021 credit.30 For example, if the IRS in August
received information through the Child Tax Credit Non-filer Sign-up Tool that a taxpayer was
eligible for a 2021 credit of $7,200 and began issuing advance payments in September, this
taxpayer could be expected to receive four monthly payments of $900, which in total would equal
half of their 2021 credit.31 (The Child Tax Credit Non-filer Sign-up Tool is also referred to as the
child credit non-filer portal in this report. Non-filers can also use the GetCTC tool developed by
Code for America in consultation with the Treasury.32) Alternatively, in certain situations the IRS
may issue different amounts of monthly payments such that the sum of al payments issued in
2021 is 50% of their estimated credit amount (i.e., the taxpayer is “made whole”).33

29 If the taxpayer’s principal place of abode is not the United States in 2021, but it is in 2020 (or 2019, if 2020 data are
not available), then the refundable portion of their 2021 credit amount will be phased in using the earned income
formula. Hence, some low-income taxpayers may not be eligible for the full credit amount of $3,600 per young child
and $3,000 per older child, and may receive more in advance payments than they are eligible for. See question G6 “I
filed my 2020 tax return with a U.S. address although my child and I do not live in the United States. I received Letter
6417 at my U.S. address stating that the IRS will begin to disburse advance Child T ax Credit payments to me. What
can I do?” on the IRS’s website. Internal Revenue Service, 2021 Child Tax Credit and Advance Child Tax Credit
Paym ents—Topic G: Receiving Advance Child Tax Credit Paym ents, https://www.irs.gov/credits-deductions/2021-
child-tax-credit -and-advance-child-tax-credit-payments-topic-g-receiving-advance-child-tax-credit -payments.
30 See IRC §7527A(b)(3), §7527A(a)(3), §7527A(b)(1).
31 If the 2021 credit is estimated to be $7,200, then half of that—$3,600—can be issued in advance. If the taxpayer
received six monthly payments, the payments would thus equal $600 each month. If the taxpayer receive d four monthly
payments, the payments would equal $900 each month. According to the IRS, “Families who did not get a July
payment and are getting their first monthly payment in August will still receive their total advance payment for the
year. T his means that the total payment will be spread over five months, rather than six, making each monthly payment
larger.” Internal Revenue Service, “IRS: Families now receiving August Child T ax Credit payments; still time for low-
income families to sign up,” press release, August 13, 2021, https://www.irs.gov/newsroom/irs-families-now-receiving-
august-child-tax-credit -payments-still-time-for-low-income-families-to-sign-up.
32 Code for America’s non-filer tool can be found at https://www.getctc.org/en.
33 T his may be the case, for example, when the IRS made an error in issuing th e first payments, as was the case with
certain IT IN filers. According to the IRS National T axpayer Advocate, “Over one million taxpayers who filed their
returns with an IT IN did not receive their Child T ax Credit (CT C) monthly payment in July. T he IRS has identified the
issue, which it fixed prior to issuing the August payments; the issue is not anticipated to occur again. But the fix comes
with confusion. Since the IRS erroneously did not make the July payment, it calculated the August payment based upon
the total amount of eligible AdvCT C and then divided it by five months (August -December). Good news: as of August
23, the IRS is retroactively issuing the July payment to these individuals. However, the July payment amount will be
based upon the total amount of eligible AdvCT C divided by six months (July-December) and then reduced by the
additional amount included in the August payment.... I will try to simplify by way of an example: Mary has one child
and based upon her 2020 income may have a CT C credit of $3,000. One half of that amount, $1,500, would be eligible
to be paid in six monthly payments ($250) as AdvCT C. If Mary filed her 2020 return with an IT IN and did not receive
her July payment the IRS calculated her August payment based upon a five-month schedule (August -December) and
paid Mary $300 in August ($1,500 divided by five payments). Now that the IRS is retroactively paying Mary her July
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The statute also al ows adjustments to advance payments that would reduce these amounts, for
example if a taxpayer provided information that indicated their 2021 credit would be smal er.
This may occur when a taxpayer’s advance payments are estimated using 2019 tax data, but their
2020 return results in a smal er estimated 2021 credit (and hence smal er advance payments) once
it is filed and processed.34 It may also occur when a taxpayer updates their information with the
IRS using the agency’s update portal and that information results in a smal er estimated 2021
credit. However, in practical terms, the IRS has stated that it wil only be able to accept
information in “late summer” that could affect the advance amount. It is unclear if information
updated in “late summer” would mean any subsequent adjustments would occur beginning with
the October payment, or whether these adjustments would be made later (i.e., reflected with the
November or December payments).35
B5. Is there an income threshold above which advance payments will not be
issued?
No, the statute does not include an income threshold above which advance payments wil not be
issued. (Higher-income taxpayers are eligible for a smal er credit compared to low- and
moderate-income taxpayers [see Figure 1].) In addition, the IRS has not provided any indication
that it would be treating higher-income taxpayers differently than low- and moderate-income
taxpayers for purposes of advance payments. Like al taxpayers, higher-income taxpayers may
elect to opt out of receiving advance payments using the update portal (see Appendix C for more
information).

payment, she will be receiving $250 for the July payment based upon a six -month schedule (July-December, $1,500
divided by six payments) minus the additional $50 she received in August. Her July payment will be $200. Now to add
to Mary’s confusion, the IRS will be issuing the September payment in the correct amount of $250. All subsequent
payments should be $250.” T axpayer Advocate Service, “ NT A Blog: Advance Child T ax Credit: What You Should
Know: Part II,” August 26, 2021, https://www.taxpayeradvocate.irs.gov/news/nta-blog-advance-child-tax-credit-what -
you-should-know-part -ii/.
34 See, for example, the answer to question E4 “My 2019 tax return was used to determine my advance Child T ax
Credit payments. I recently filed my 2020 tax return with a different amount of income. Will the IRS update my
advance Child T ax Credit payment amounts?” on the IRS’s website. Internal Revenue Service, 2021 Child Tax Credit
and Advance Child Tax Credit Paym ents—Topic E: Advance Paym ent Process of the Child Tax Credit,
https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-e-advance-
payment -process-of-the-child-tax-credit#e1#e1.
35 In late summer, the IRS has stated that taxpayers will be able to “make changes to your dependents, marital status
and income and re-enroll if you previously unenrolled.” Prior to that, the update portal could be used to unenroll from
advance payments, make changes to bank information, and update address information. See the answer to question A16
“When will I be able to update my information?” at Internal Rev enue Service, 2021 Child Tax Credit and Advance
Child Tax Credit Paym ents—Topic A: General Inform ation, https://www.irs.gov/credits-deductions/2021-child-tax-
credit-and-advance-child-tax-credit -payments-topic-a-general-information#a16#a16. In addition, changes to the update
portal must be made three days before the first T hursday of the next month in o rder to apply to the following month’s
payments. For example, information updated by August 30, 2021, will be reflect on the September payments, issued on
September 15, 2021. Information updated after August 30, 2021, but by October 4, 2021, will be reflec ted in the
October payment issued October 15, 2021. See the answer to question J2 “What is the deadline to unenroll or make
changes to my bank information?” at Internal Revenue Service, 2021 Child Tax Credit and Advance Child Tax Credit
Paym ents—Topic J: Unenrolling from Advance Paym ents, https://www.irs.gov/credits-deductions/2021-child-tax-
credit-and-advance-child-tax-credit -payments-topic-j-unenrolling-from-advance-payments.
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B6. Will otherwise eligible households who, due to their low incomes, do not
normally file a tax return, automatically receive the advance payments?
No, the IRS must have information from a 2020 or 2019 income tax return in order to calculate
the estimated 2021 credit amount, and then issue advance payments. (The IRS wil also issue
payments to taxpayers who used the non-filer portal to receive the first “stimulus check” payment
in 2020.) Eligible recipients who are general y not required to file an income tax return due to
their low incomes are encouraged to use the child credit non-filer portal to provide the necessary
information to issue advance payments.36 If taxpayers do not receive any advance payments in
2021, but are eligible for the 2021 credit, they wil general y receive the entire amount of the
credit when they file their 2021 income tax return. (However, if the taxpayer is subject to offset,
the credit they receive with their 2021 tax return could be reduced; see “B11. Can the advance
payments of the credit and/or the credit claimed on 2021 income tax returns be reduced for child
support or other debts?”)
B7. Are there any limitations on how the advance payments of the credit may
be spent?
No, there are no limitations or restrictions on how the advance payments (or the amount received
after filing 2021 income tax returns) may be spent. (Data from the Census Household Pulse
Survey indicate that food, utilities, and clothing were the most common items the first advance
payments were spent on.)37
B8: How will taxpayers determine the amount of the credit they can claim on
their 2021 income tax return?
When a taxpayer files their 2021 return (in 2022), they wil first calculate the total amount of the
2021 child credit they are eligible for (based on the number of qualifying children, income, and
marital status for 2021). Then, the taxpayer wil subtract from their total 2021 credit the sum of
advanced child credit payments they received during calendar year 2021. To help with this
calculation, the IRS wil mail a year-end summary statement (Letter 6419) to al taxpayers who
received advance payments during 2021.
For example, if an unmarried taxpayer had two young children (and filed as a head of household)
and less than $112,500 of income in 2020 and 2021, they would be eligible for a total child credit
for 2021 of $7,200. Since they would have received half of their total 2021 credit in advance
payments in calendar year 2021 ($3,600), they would ultimately claim the remaining half
($3,600) on their 2021 return. The taxpayer is effectively splitting their total credit between the
advance payments they receive in 2021 (50% of their total credit) and the remaining 50% of the
credit they claim on their 2021 tax return.

36 T he tool is available at https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool. T axpayers can
also use the Code for America non-filer tool at https://www.getctc.org/en. Code for America’s tool was developed in
consultation with T reasury. Unlike the IRS tool, the Code for American tool works on mobile devices. and is available
in Spanish.
37 U.S. Census Bureau, Week 34 Household Pulse Survey: July 21-August 2, T able 1. Child T ax Credit Payment Status
and Use, by Select Characteristics, August 11, 2021, https://www.census.gov/data/tables/2021/demo/hhp/hhp34.html.
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B9. Will taxpayers need to pay back excess amounts of the child credit?
Potential y, yes, if they receive more in advance payments than they are eligible to claim on their
2021 income tax returns. A taxpayer may have excess amounts of the credit due to changes in
income, marital status, or number of qualifying children between the year used to estimate the
advance (2020 or 2019) and 2021. For example, if a taxpayer’s estimated advance payments
totaled $5,400 (based on an estimate of three qualifying young children) but the total 2021 credit
they are actual y eligible for is $3,600 (because they only had one qualifying young child), they
would need to repay up to $1,800 (the difference between $5,400 and $3,600).38 Excess payments
caused by changes in the number of qualifying children general y wil not need to be repaid for
lower- and moderate-income taxpayers who are protected by a safe harbor (this safe harbor
decreases as income rises). For more information on the safe harbor, see “B10. How does the
“safe harbor” work?” and Table D-1. Repayment may either reduce a taxpayer’s 2021 tax refund
or result in the taxpayer being required to remit payment to the IRS (or be subject to offset of a
future tax refund).
B10. How does the “safe harbor” work?
Lower- and moderate-income taxpayers who receive excess advance payments of the credit due
to changes in the number of qualifying children between 2021 and 2020 (or 2019, if 2020 data are
unavailable) may be protected from paying back some or al of these excess payments due to a
safe harbor. Effectively, after calculating any excess payments, the taxpayer subtracts from this
amount the total safe harbor amount they are eligible for to determine any amount they must
ultimately repay (either in terms of reducing their tax refund or remitting payment).
The safe harbor amount is first calculated by multiplying $2,000 times the difference in the
number of qualifying children between the reference year (2020 or 2019) and 2021. This is the
maximum amount of the safe harbor. The safe harbor amount is then phased down ratably—that
is, proportional y—for head of household filers with 2021 income between $50,000 and $100,000
and for married joint filers with 2021 income between $60,000 and $120,000.
For example, if a married taxpayer’s estimated advance payments issued in 2021 totaled $5,400
(based on an estimate of three qualifying young children) but the total 2021 credit they are
actual y eligible for is $3,600 (because they only had one qualifying young child), their excess
payments would equal $1,800. If the taxpayer’s 2021 income was $75,000, they would be eligible
for a $3,000 safe harbor.39 Since their safe harbor ($3,000) is greater than their excess payment
amount ($1,800), the taxpayer would not need to repay the excess amount. For more information
on the safe harbor, see Table D-1.
The safe harbor does not apply in cases where excess payments arise from changes in income,
marital status, or principal place of abode between the reference year and 2021.

38 T hree young children x $3,600 per young child = a maximum credit of $10,800. Since up to 50% of the credit can be
issued in advance payments, the maximum amount of advance payments equals $5,400.
39 T he maximum safe harbor they would be eligible for would be $4,000 ($2,000 times the next difference in the
number of qualifying children, which is two in this example.) T he taxpayer’s income places them in the phaseout range
of the safe harbor and their maximum safe harbor would be reduced by 25% [=($75,000 -$60,000)/($120,000-$60,000)]
from $4,000 to $3,000.
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B11. Can the advance payments of the credit and/or the credit claimed on 2021
income tax returns be reduced for child support or other debts?
The advance payments of the child credit are general y exempt from offset for certain past-due
debts the recipient owes (including past-due child support).40 In other words, the monthly advance
payments issued in 2021 will not be reduced for these debts before they are issued by the
Treasury. However, the portion of the credit claimed on 2021 income tax returns is subject to
offset. In practical terms, that means that when a taxpayer files their 2021 tax returns next year
and claims the remaining portion of the 2021 child credit, the portion of their 2021 tax refund
attributable to the child credit can be offset.
In addition to the offset mechanism—which effectively reduces a government payment before it
is issued by Treasury—creditors may also recoup past-due debts through garnishment and levy
actions. Practical y, these occur after a payment is issued (e.g., deposited in a bank account).
There are no statutory provisions at the federal level that protect the child credit—received either
as advance payments or claimed on an income tax return—from garnishment or levy actions.
B12. Does receipt of the credit—either in the form of advance payments or
claimed on a tax return—affect eligibility for other government programs?
No, receipt of the child credit wil not affect eligibility for or the amount of other federal y funded
government programs. Under a permanent provision of the Internal Revenue Code, tax credits,
including the child tax credit—whether received as advance payments or claimed on an income
tax return—do not count as income or resources for a 12-month period in determining eligibility
for, or the amount of assistance provided by, any federal y funded public benefit program.41
B13. Is the ARPA-expanded child credit—either in the form of advance
payments or claimed on a tax return—taxable?
No, the child credit is not subject to federal taxation, but in some cases, the expanded credit may
affect state liabilities.42 At the federal level, tax credits, including the ARPA-expanded child
credit, are not considered taxable income. This is the case regardless of whether the credit is
claimed on a tax return or issued as advance payments.

40 In this report, the term offset refers to the T reasury Offset Program, which “collects past -due (delinquent) debts (for
example, child support payments) that people owe to state and federal agencies.” For more information, see Bureau of
Fiscal Service, Treasury Offset Program , https://fiscal.treasury.gov/top/.
41 IRC §6409.
42 In some cases, the expanded child credit may affect state liabilities, as discussed in a report by Elaine Maag and
David Weiner of the T ax Policy Center: “ Although Oklahoma is the only state where taxpayers will benefit from its
links to the federal CT C, it is not the only state with taxpayers who will be affected by the federal change. About 1
million households across other states will see th eir state income taxes increase as their federal income taxes drop from
the larger CT C. T hree-quarters of those taxpayers are in states with a federal income tax deduction. T hat is, these states
allow taxpayers to reduce their taxable income by the amount of their federal income tax bill. If federal taxes drop,
more income will be taxed at the state level. Other interactions between federal and state laws cause the state tax
increase for other households. For example, some states limit certain state credits to federal tax liability. With lower
federal tax liability because of the expanded CT C, households can claim less in state credits. T his can occur, for
example, in Maryland and New York.” Elaine Maag and David Weiner, How Increasing the Federal EITC and CTC
Could Affect State Taxes, T ax Policy Center, April 22, 2021, p. 7, https://www.taxpolicycenter.org/publications/how-
increasing-federal-eitc-and-ctc-could-affect -state-taxes/full.
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B14. Is the Treasury updating wage withholding schedules to reflect that up to
half of the credit is being issued as advance payments before 2021 tax returns
are filed?
No, the Treasury is not automatical y updating the amount of income taxes withheld from
workers’ paychecks to take into account that up to half of the 2021 credit wil be issued in
advance (and hence not claimed on 2021 income tax returns). Taxpayers can manual y adjust their
withholding, for example by updating their IRS Form W-4 with their employer.
C. Territorial Residents and the Child Credit
C1. Did territorial residents receive the child credit before ARPA?
It is unclear whether and to what extent residents of territories received the child credit before
ARPA. But available information suggests that the credit they received prior to ARPA was
general y less than the amount received by residents of the United States in similar circumstances
(i.e., same marital status, income, and number of children).
Puerto Rico’s income tax does not include a child credit. Prior to ARPA, residents of Puerto Rico
with three or more children could receive the additional child credit (ACTC) under the
“alternative formula.”43 (The ACTC is the amount of the credit that is greater than income taxes
owed, and is also referred to as the “refundable portion” of the credit.) Under the alternative
formula, the ACTC effectively equals 7.65% of earned income up to the maximum ACTC per
child, which was $1,400 per child before ARPA. Puerto Rican residents applied for the ACTC
under the alternative formula directly with the IRS. The alternative formula is, in most cases, less
generous than the ACTC calculated under the earned income formula.44 Because only families
with three or more children could receive the ACTC under the alternative formula, Puerto Rican
families with one or two children did not receive the ACTC.
While the territorial governments of American Samoa and mirror-code territories may have had
child credits under their own internal tax laws, it is unclear whether and to what extent these
territorial governments paid out these credits from local funds.45 Like residents of Puerto Rico,
residents of these territories with three or more children could general y receive the ACTC under
the alternative formula (and hence families with fewer than three children could not receive the
ACTC). Unlike residents of Puerto Rico, residents of American Samoa, Guam, the
Commonwealth of the Northern Mariana Islands (CNMI), and the United States Virgin Islands

43 T hroughout this report, the discussion of residents of U.S. territories will be of bona fide residents of these territories.
According to the Joint Committee on T axation, “ [a] bona fide resident of a territory for a taxable year is generally an
individual (1) who is present for at least 183 days during the taxable year in the territory, and (2) who does not have
either a tax home outside the territory or a closer connection to the United States or a foreign country than to the
territory.... Broadly, a bona fide individual resident of a territory is exempt from U.S. tax on income derived from
sources within that territory but is subject to U.S. tax on U.S.-source and non-territory-source income.” Further, this
discussion generally focuses on territorial residents who are not required to file a federal income tax return, and hence
do not receive the child credit with the federal income tax return.
44 Under the earned income formula, the ACT C is calculated as 15% of earned income above $2,500, up to the
maximum ACT C per child of $1,400. Beginning in 2026, the formula is scheduled to be 15% of earned income above
$3,000 up to a maximum of $1,000 per child.
45 A mirror code territory is a territory whose own territorial tax law is effectively the U.S. Internal Revenue Code
(IRC) with the territory’s name substituted for the United States wherever the term United States is used in the IRC
(i.e., it is a “ mirror” of the IRC).
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(USVI) applied for the ACTC with their territorial governments, with the IRS issuing aggregate
payments to the respective territorial governments to cover the costs of the child credit
(sometimes referred to as a “cover-over” payment).46 (See Table E-1.)
C2. How did ARPA change the child credit for territorial residents in 2021?
Broadly, ARPA provides clarity on both the amount of the credit territorial residents can receive
and the federal funding to cover the cost of this benefit permanently, including for 2021. ARPA
general y al ows territorial residents to receive the entire amount of the ARPA-expanded credit.47
Residents of Puerto Rico wil be eligible to receive the ARPA-expanded child credit when they
file a 2021 tax return directly with the IRS.48 Residents of American Samoa can receive the full
amount of the ARPA-expanded child credit. If American Samoa has an approved plan to
distribute these payments, then the Treasury is directed to provide the American Samoan
government funds to cover their full cost, and the American Samoan government wil pay out the
benefit to its residents. Otherwise, residents of American Samoa wil be able to file a return with
the IRS to directly claim the benefit. Residents of mirror-code territories can receive the full
benefit of the ARPA-expanded child credit. Residents of mirror-code territories wil receive the
benefit from their respective territorial governments, with the U.S. Treasury directed to provide
each government with a “cover-over” payment for the total cost of the benefit. (See Table E-1.)
C3. Will territorial residents receive the advance payments of the 2021 credit?
No, territorial residents wil not receive advance payments from the U.S. Treasury. Residents of
Puerto Rico, who receive their child credit payments directly from the IRS, are ineligible to
participate in the federal advance payment program. Hence, they wil receive the full benefit
when they file a 2021 tax return with the IRS in early 2022.
If American Samoa and mirror-code territorial governments elect to advance the 2021 ARPA-
expanded credit directly to their residents in a manner similar to the federal advance program, the
law provides that Treasury wil provide these governments with an additional $300,000 per
territory for the associated administrative costs (in addition to the amounts to cover the aggregate
costs of the benefit itself).49
C4. How did ARPA change the child credit for territorial residents after 2021?
Broadly, ARPA provides clarity on both the amount of the benefit territorial residents can receive
and the federal funding to cover the cost of this benefit permanently—that is, after 2021.
Residents of Puerto Rico—irrespective of the number of children they have—wil be eligible to
receive the ACTC under the alternative formula, applying for this benefit directly with the IRS. If
American Samoa has an approved plan to distribute to its residents child credit amounts—both

46 T he IRS Chief Financial Officer (CFO) made these aggregate payments to territorial governments prior to ARPA.
47 For more information, see T axpayer Advocate Service, TAS Tax Tip: 2021 Advance Child Tax Credit information for
U.S. Territory residents, August 25, 2021, https://www.taxpayeradvocate.irs.gov/news/tas-tax-tip-2021-advance-child-
tax-credit -information-for-u-s-territory-residents/.
48 IRS Form 1040-SS or IRS Form 1040-PR.
49 For example, the governor of the Commonwealth of the Northern Mariana Islands issued a press release stating that
its local tax authority, the Department of Finance, Division of Revenue and T axation (DRT ), is implementing a plan.
Office of the Governor of the Commonwealth of the Northern Mariana Islands, “ DRT planning for advanced payments
of the Expanded Child T ax Credit,” press release, May 13, 2021, https://governor.gov.mp/news/press-releases/drt-
planning-for-advanced-payments-of-the-expanded-child-tax-credit/.
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the refundable portion (i.e., the ACTC) and the nonrefundable portion—that reflect those in the
Internal Revenue Code (IRC) for a given year, then Treasury is directed to provide the American
Samoan government funds to cover the full cost of this credit.50 If no such plan is in effect,
American Samoan residents may apply directly with the IRS like Puerto Rican residents (i.e.,
they can apply directly with the IRS for the ACTC under the alternative formula, disregarding the
limitation for three or more children). Residents of the mirror-code territories can receive child
credit amounts—both the refundable portion (i.e., the ACTC) and the nonrefundable portion—
that reflect those in the Internal Revenue Code (IRC) for a given year. Treasury is directed to
provide these governments funds to cover the full cost of this credit. (See Table E-1.)

50 T his includes the refundable portion of the child credit —the ACT C—calculated under the earned income formula.
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Appendix A. Selected Research on the ARPA-
Expanded Child Credit
A variety of research studies have evaluated the effects of the ARPA-expanded child credit, either
as a standalone provision or in combination with other provisions.51 A selection of these studies is
provided in this appendix. In some cases, these studies examined the impact of the ARPA-
expanded credit if it were to be permanent or extended as part of the Biden Administration’s
American Families Plan.
I. Poverty and Financial Wellbeing
Table A-1 provides a selected list of studies that examine the ARPA-expanded child credit’s
impact on poverty as a standalone provision. Of note, in 2019, the National Academy of Sciences
released a study evaluating the poverty reduction impact of a child al owance similarly structured
to the ARPA-expanded child credit.52
Table A-1. Selected Research on the ARPA-Expanded Child Credit’s Impact on
Poverty and Financial Wellbeing
Date
Study
Issued
Major Impact/Outcome Evaluated
Notes
Jain Family
September
Child poverty: Simulated estimates of
“Our analysis conservatively estimates
Institute,
8, 2021
child poverty rates of the ARPA-expanded
that upwards of 6.4 mil ion eligible
Assessing Non-filer
child credit under different assumptions
children wil not receive the benefit,
Rates & Poverty
about how many eligible non-filing
resulting in an estimated child poverty
Impact for the
households receive the benefit.
reduction of 11 to 18 percent, and a
American Rescue
92 percent take-up rate. We do not
Plan Act’s
know exactly who these children are,
Expanded CTC, by
but we find a substantial portion—at
Jack Landry and
least 71 percent—receive other
Stephen Nuñez
government benefits, meaning that
better data sharing between state and
federal benefits agencies could offer a
crucial avenue for enrol ment. Greater
enrol ment could dramatical y increase
the child poverty reduction, up to 40
percent.”

51 For example, see Zachary Parolin et al., The American Rescue Plan could cut child poverty by more than half, Center
on Poverty and Social Policy at Columbia University, March 11, 2021, https://www.povertycenter.columbia.edu/news-
internal/2021/presidential-policy/biden-economic-relief-proposal-poverty-impact. Or for a comparison of the average
value of all child tax benefits in 2021 by proposal, see T able 8 in Alex Brill, Kyle Pomerleau, and Grant M. Seiter, The
Tax Benefits of Parenthood: A History and Analysis of Current Proposals, American Enterprise Institute, February
2021, https://www.aei.org/research-products/report/the-tax-benefits-of-parenthood-a-history-and-analysis-of-current-
proposals/.
52 National Academies of Sciences, Engineering, and Medicine, A Roadmap to Reducing Child Poverty, 2019,
https://www.nap.edu/catalog/25246/a-roadmap-to-reducing-child-poverty.
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The Child Tax Credit: Frequently Asked Questions

Date
Study
Issued
Major Impact/Outcome Evaluated
Notes
Columbia’s
August 30,
Food Insufficiency: Researchers
“Our findings offer three primary
Center on
2021
estimated the impact of the first monthly
conclusions regarding the initial effects
Poverty and
CTC payment (i.e., the July payment) on
of the first monthly CTC payment
Social Policy, The
food insufficiency based on data from the
delivered mid-July 2021. First, the July
Initial Effects of
U.S. Census Bureau’s Pulse Survey. The
2021 CTC payment strongly reduced
the Expanded
survey asks respondents: “In the last 7
food insufficiency among low-income
Child Tax Credit
days, which of these statements best
households with children; a $100
on Material
describes the food eaten in your
increase in CTC benefits (adjusted for
Hardship, by
household?” Respondents who choose the
household-size) is associated with a 7-
Zachary Parolin
answers “Sometimes or often not enough
percentage point, or roughly 25
et al.
to eat” are considered to be food
percent, decline in food insufficiency
insufficient.
among low-income families who report
Other Material Hardship Indicators:
receipt of the CTC. Second, the effects
Researchers also estimated the impact the
of the first CTC payment on food
first monthly CTC payment had on other
insufficiency are concentrated among
hardship indicators, including difficultly
households with annual incomes of less
with paying for usual household expenses
than $35,000. Third, increasing the
and whether the household is on time with coverage rate of the CTC is critical for
rent or mortgage payments (See Table 1 of further reducing material hardship.”
the Columbia Center on Poverty and
Social Policy report).
Columbia’s
August 20,
Child poverty on a monthly basis:
“The monthly child poverty rate fel
Center on
2021
Simulated estimates of child poverty rates
from 15.8 percent in June to 11.9
Poverty and
and number of children in poverty using
percent in July 2021.... This drop in
Social Policy,
the Supplemental Poverty Measure (SPM)
child poverty is primarily due to the
Monthly Poverty
in July 2021, after the first advance
first payment of the expanded Child
Rates Among
payment of the child credit (July 2021).
Tax Credit, which on its own kept
Children after the
These estimates are also provided by
approximately 3 mil ion children from
Expansion of the
race/ethnicity.
poverty in July; without it, the monthly
Child Tax Credit,
Primary estimates assume that about 60
child poverty rate would have been 4.1
by Zachary
mil ion children live with taxpayers who
percentage points (or 25.6 percent)
Parolin et al.
receive the credit, while the maximum
higher [i.e., would have been 15.9% in
number of children who live in credit-
July].”
eligible households is estimated to be up to
67 mil ion. The authors also simulate a
range of monthly child poverty rates under
varying levels of CTC receipt (providing
estimates that range from around 56
mil ion to around 67 mil ion children
receiving the benefit).
U.S. Census
August 11,
Food Insufficiency: The percentage of
“The survey shows introduction of the
Bureau, Economic
2021
adults experiencing food insufficiency
[advanced] CTC coincided with a drop
Hardship Declined
(sometimes or often not having enough to
in food insufficiency in households with
in Households with
eat) before and after receipt of the first
children [from 11% to 8.4%]. It also
Children as Child
advance child credit payments in July 2021.
showed that in those households,
Tax Credit
Financial Hardship: The percentage of
there was a drop in difficulty paying
Payments Arrived,
adults having difficulty paying expenses
weekly expenses [from 31.5% to
by Daniel J.
before and after receipt of the first
29.0%].”
Perez-Lopex
advance child credit payments in July 2021.
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The Child Tax Credit: Frequently Asked Questions

Date
Study
Issued
Major Impact/Outcome Evaluated
Notes
Urban Institute,
July 29,
Child Poverty: Simulated child poverty
“Expanding the CTC would reduce
How a Permanent
2021
rates and the number of children in
child poverty by 5.9 percentage points,
Expansion of the
poverty measured using the SPM during a
from 14.2 to 8.4 percent (rounded to
Child Tax Credit
nonrecessionary economy (2018 data
the nearest tenth), using 2018 as a
Could Affect
used). Child poverty statistics broken
benchmark for a typical year. That
Poverty, by
down by race/ethnicity, metropolitan and
means 4.3 mil ion fewer children would
Gregory Acs and
nonmetropolitan areas, states, race, and
be in poverty in a typical year,
Kevin Werner
ethnicity.
representing over a 40 percent
Other Impacts: Information on changes
decrease in child poverty.”
in family income is also provided.
Congressional
July 13,
Child Poverty: Simulated child poverty
“CRS estimates that in a
Research
2021
rates measured using the SPM during a
nonrecessionary economy, the ARPA
Service, The Child
nonrecessionary economy (2016-2018 data expansion of the child credit wil result
Tax Credit: Impact
used). Child poverty rates are broken
in nearly al families with children
of the American
down by race/ethnicity.
including the lowest-income families
Rescue Plan Act
Other Impacts: Information on poverty
with children, receiving the child credit
(ARPA; P.L. 117-2)
rates of individuals who live in families with [from 84% of al families with children
Expansion on
children, changes in family income, and
receiving the credit before ARPA, to
Income and
percentage of families receiving the credit
96% after ARPA].... the estimates also
Poverty, by
is also provided.
indicate that the largest share of new
Margot Crandal -
recipients wil be the poorest families
Hol ick, Jameson
[from 52% of poor families with
Carter, and
children receiving the credit before
Conor Boyle
ARPA to 94% after ARPA]. CRS’s
analysis indicates that the largest
increases in income are estimated to
occur among poor families with
children, substantial y reducing the
prevalence of child poverty [i.e., the
child poverty rate is estimated to fal
from 13% to 7%] and the depth of
poverty among families with children
[i.e., the poverty gap is estimated to fal
by 40%].”
Urban Institute,
July 2021
Poverty: Number of people in 2021 lifted
For this analysis, the Urban Institute
2021 Poverty
out of poverty by age using the SPM
models only the benefits received in
Projections:
(projected 2021 data). Estimates of the
2021—that is, the advance of the child
Assessing the
impact of the advanced child credit can be
credit, which is one-half of the total
Impact of Benefits
found in Table 6 of the Urban report.
credit amount. This study finds that the
and Stimulus
This study also estimates the poverty
advanced child credit wil lift 1.8 mil ion
Measures, by
impact of COVID-19 policies in
people out of poverty in 2021, of
Laura Wheaton,
combination.
which 1 mil ion are children (under 18
Linda Giannerel i,
years old); (see Table 6 of the Urban
and Ilhman
report).
Dehry (This is an
update of a
March 2021
analysis.)
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The Child Tax Credit: Frequently Asked Questions

Date
Study
Issued
Major Impact/Outcome Evaluated
Notes
Center on
May 24,
Child Poverty: The simulated reduction
“The ful Families Plan’s Child Tax
Budget and
2021
in child poverty rates measured using the
Credit would lift an estimated 4.1
Policy Priorities
SPM during a nonrecessionary economy
mil ion children above the poverty line,
(CBPP), Congress
(2016-2018 data used). Reductions in child
of whom 1.6 mil ion are Latino, 1.2
Should Adopt
poverty rates are broken down by
mil ion are white, 930,000 are Black,
American Families
race/ethnicity for each state.
and 132,000 are Asian.... Of the
Plan’s Permanent
Other Impacts: Number and percentage
roughly 9.9 mil ion children it would lift
Expansion of Child
of children (poor and nonpoor) who
above or closer to the poverty line, 3.8
Tax Credit and
would benefit is also provided by
mil ion are Latino, 2.9 mil ion are
EITC, Make
race/ethnicity for each state.
white, 2.1 mil ion are Black, and
Additional
426,000 are Asian. These changes
Provisions
would reduce the number of children
Permanent, by
in poverty by more than 40 percent
Chuck Marr et
national y.”
al.
American
April 22,
Employment: Simulated estimates of the
“We analyzed the impact of a
Enterprise
2021
impact of the ARPA-expanded child credit
permanent CTC expansion on
Institute (AEI),
on employment.
employment using AEI’s Tax-Calculator
Unintended
along with an employment model and
consequences:
set of assumptions from the
Democrat’s child
Congressional Budget Office (CBO).
tax credit wil cost
According to our calculation, the likely
jobs, by Alex Bril
impact of the CTC expansion on
and Kyle
employment wil be 296,000 ful -time
Pomerleau
equivalent jobs lost (+/- 155,000). This
is due to both the elimination of the
phase-in and the phase-out of the
larger benefit.”
Source: CRS.
II. Estimates of the Number of Children, Families, and Taxpayers
Receiving the ARPA-Expanded Child Credit
Children
By State
 The Center on Budget and Policy Priorities (CBPP) has estimated the number of
children who would be affected by the permanent extension of the ARPA-
expanded child credit: by state (Appendix Table 1) and by state and
race/ethnicity (Appendix Table 4). CBPP has also estimated the reduction in
child poverty by race and ethnicity from a permanent expansion of the ARPA-
expanded child credit (Appendix Table 3).
 CBPP also conducted a comparable analysis of the impact of the temporary
ARPA expansion of the child credit.
By Congressional District
 Representative DeLauro’s office has provided estimates of the number of
children impacted by the ARPA-expanded child credit by congressional district
(methodology can be found here).
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Families
By State
 CRS estimated the number of families eligible for the ARPA-expanded child
credit. Families may include more than one taxpayer. See CD1326941, State-
Level Estimates of Eligibility for the Expanded Child Tax Credit Included in the
American Rescue Plan Act of 2021 (ARPA; P.L. 117-2), by Conor F. Boyle,
Jameson A. Carter, and Margot L. Crandal -Hollick, available to congressional
clients upon request from the authors.
 The Niskanen Center has also published estimates of the state-level impact of the
child credit (in addition, it has provided estimates by metropolitan and
nonmetropolitan areas in states, as wel as national estimates by households’ race
and ethnicity). These accompany a report by the Niskanen Center on the
economic and community impact of the credit.
By Congressional District
 The Niskanen Center has also published estimates of the county-level impact of
the expanded child credit. These accompany a report by the Niskanen Center on
the economic and community impact of the credit.
Taxpayers
 The Tax Policy Center (TPC) has estimated the percentage of taxpayers who
benefit from the child tax credit in 2021 after the ARPA expansion, by income
level (Table T21-0044) and by income percentile (Table T21-0045) at the
national level. Note that TPC’s analysis is by “tax units” in which a tax unit is
everyone listed on an income tax return; includes filing and nonfiling units. Tax
unit is general y used synonymously with the term taxpayer.
 Estimates in Table T21-0044 can be compared to the benefit from the pre-
ARPA credit in 2021 in Table 21-0042 to estimate the impact of the ARPA-
expanded credit by income level.
 Estimates in Table 21-0045 can be compared to the benefit from the pre-
ARPA credit in 2021 in Table T21-0043 to estimate the impact of the ARPA-
expanded credit by income percentile.
 The Treasury is providing data on the number of taxpayers receiving the
advanced payment of the credit by state as wel as the total amount received by
taxpayers in each state. See “Treasury Data on Advance Payments” in Appendix
C.
III. Estimates of How Families/Taxpayers Spent the Child Credit
 U.S. Census Bureau, August 11, 2021: “Many HPS [Household Pulse Survey]
respondents reported spending their CTC payments on more than one thing.
About 47% reported spending it on food. Nearly 10% of adults in households that
received the CTC—and 17% of those with at least one child under age 5—spent
their CTC on child care.” More details can be found in the Detailed Tables: Child
Tax Credit Table.
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Appendix B. Congressional Resources
House Ways and Means Committee
 Ways and Means Committee, “Markup of the Build Back Better Act,” September
9, 2021-September 15, 2021
 One-pager on IRS child tax credit portals, June 10, 2021
 Child tax credit portals FAQs, June 10, 2021
 Subcommittee on Select Revenue Measures hearing, “Funding Our Nation’s
Priorities: Reforming the Tax Code’s Advantageous Treatment of the Wealthy,”
May 12, 2021
 Subcommittee on Oversight hearing on the 2021 filing season, March 18, 2021
House Appropriations Committee
 Subcommittee on Financial Services and General Government hearing on
Treasury Oversight, May 27, 2021
House Financial Services Committee
 Subcommittee on Consumer Protection and Financial Institutions hearing,
“Banking the Unbanked: Exploring Private and Public Efforts to Expand Access
to the Financial System,” July 21, 2021
Senate Finance Committee
 Full committee hearing on the President’s FY2022 budget, June 16, 2021
 Full committee hearing on the IRS’s FY2022 budget, June 8, 2021
 Full committee hearing, “Combating Inequality: The Tax Code and Racial,
Ethnic, and Gender Disparities,” April 20, 2021
 Full committee hearing, “The 2021 Filing Season and 21st Century IRS,” April
13, 2021
Senate Banking, Housing, and Urban Affairs Committee
 Subcommittee on Financial Institutions and Consumer Protection hearing,
“Protecting Consumers from Financial Fraud and Scams in the Pandemic
Recovery Economy,” August 3, 2021
 Full committee hearing, “American Rescue Plan: Shots in Arms and Money in
Pockets,” March 25, 2021

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Appendix C. IRS and Treasury Resources on the
ARPA-Expanded Child Credit for 2021
IRS Resources for Taxpayers
 Al information from the IRS on the child tax credit and the advance payments of
the child tax credit—including Frequently Asked Questions, Tax Tips, Outreach
Assistance, and news releases—can be found on the IRS resource page.
 Non-filer Portal: Eligible non-filers can use the IRS Child Tax Credit Non-filer
Sign Up Tool to receive advance payments.53
 Code for America, in partnership with the IRS and Treasury, has launched a
simplified portal at GetCTC.org (the portal works on mobile devices and is
also available in Spanish).54
 Update Portal: Eligible taxpayers who want to update information with respect
to advance payments or opt out of advance payments can use the IRS Child Tax
Credit Update Portal.
Treasury Data on Advance Payments
Treasury has provided data on advance payments of the 2021 child credit by state:
 Advance Child Tax Credit Payments Disbursed August 2021, by State
 Advance Child Tax Credit Payments Disbursed July 2021, by State
Treasury Office of Tax Analysis (OTA) Studies
 Treasury’s Office of Tax Analysis (OTA) has estimated the number of taxpayers
who would benefit from the child credit in 2022, under current law (i.e., the
ARPA changes expiring at the end of 2021), and under the Biden
Administration’s proposal (i.e., if the ARPA changes were in effect in 2022).
These analyses include estimates of the number of taxpayers that wil benefit, the
total dollar amount of the benefit, and the average benefit per taxpayer broken
down by adjusted gross income (AGI). Detail on the Biden Administration
proposal can be found in the FY2022 Treasury Greenbook.

53 Links to all IRS tools for the advanced payment of the 2021 child credit can be found at https://www.irs.gov/credits-
deductions/advance-child-tax-credit -payments-in-2021.
54 See Chris Riotta, “T reasury taps Code for America for tax credit tool,” FCW, August 13, 2021, https://fcw.com/
articles/2021/08/13/getctc-code-for-america-treasury.aspx?m=1. “ Wally Adeyemo, deputy secretary of the T reasury,
said in a statement on Friday the agency was working with Congress to create a permanent signup tool allowing
America’s most vulnerable families—those who do not earn enough income to file taxes annually—to access the
expanded CT C program. T he administration said it would partner with the civic technology non -profit Code for
America to release an initial version of that platform in order to more quickly en roll new families.”
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IRS National Taxpayer Advocate
 The IRS National Taxpayer Advocate published three blog posts in late August
2021 on the advanced monthly payments of the ARPA-expanded child credit.
 “Advance Child Tax Credit: What You Should Know: Part I,” which
“addresse[s] ten things that individuals should know about the Advance
Child Tax Credit (AdvCTC)”;
 “Advance Child Tax Credit: What You Should Know: Part II,” which
“focus[es] on issues experienced by taxpayers with Individual Taxpayer
Identification Numbers (ITINs) and the issuance of paper checks versus
direct deposits for the August payment”; and
 “Advance Child Tax Credit: What You Should Know: Part III,” which
“explain(s) how AdvCTC tools work, including ID.me, and wil discuss the
struggles some taxpayers are facing in receiving their AdvCTC.”
Treasury and IRS Press Releases
 IR-2021-171, August 20, 2021, “Child Tax Credit: New update address feature
available with IRS online portal; make other changes by August 30 for
September payment”
 IR-2021-169, August 13, 2021, “IRS: Families now receiving August Child Tax
Credit payments; stil time for low-income families to sign up”
 Treasury press release jy0322, August 13, 2021, “Treasury and IRS Disburse
Second Month of Advance Child Tax Credit Payments”
 IR-2021-156, July 21, 2021, “IRS holds additional weekend events July 23-24 to
help people with Child Tax Credit payments and Economic Impact Payments”
 IR-2021-153, July 15, 2021, “IRS: Monthly Child Tax Credit payments begin”
 Treasury press release jy0274, July 15, 2021, “Treasury and IRS Announce
Families of Nearly 60 Mil ion Children Receive $15 Bil ion in First Payments of
Expanded and Newly Advanceable Child Tax Credit”
 IR-2021-150, July 12, 2021, “IRS: Online Child Tax Credit eligibility tool now
available in Spanish; other multi-lingual materials help families see if they
qualify for advance payments”
 IR-2021-146, July 7, 2021, “IRS holds special weekend events to help people
who don’t normal y file taxes get Child Tax Credit payments and Economic
Impact Payments”
 IR-2021-143, June 30, 2021, “IRS: Families receiving monthly Child Tax Credit
payments can now update their direct deposit information”
 IR-2021-133, June 24, 2021, “IRS online tool helps families see if they qualify
for the Child Tax Credit; one of three tools now available for the upcoming
advance payments”
 IR-2021-132, June 23, 2021, “IRS and community partners team up to provide
free tax help for families to get advance Child Tax Credit payments and
Economic Impact Payments”
 IR-2021-130, June 22, 2021, “IRS announces two new online tools to help
families manage Child Tax Credit payments”
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The Child Tax Credit: Frequently Asked Questions

 IR-2021-129, June 14, 2021, “IRS unveils online tool to help low-income
families register for monthly Child Tax Credit payments”
 Treasury press release jy0227, June 14, 2021, “Treasury and IRS Announce New
Online Tool to Help Families Register for Monthly Child Tax Credit”
 IR-2021-124, June 7, 2021, “IRS sending letters to more than 36 mil ion families
who may qualify for monthly Child Tax Credits; payments start July 15”
 IR-2021-116, May 19, 2021, “IRS urges groups to share information to help
those without permanent addresses get benefits including Economic Impact
Payments, upcoming advance Child Tax Credit”
 IR-2021-113, May 17, 2021, “IRS, Treasury announce families of 88 percent of
children in the U.S. to automatical y receive monthly payment of refundable
Child Tax Credit”
 Treasury press release jy0177, May 17, 2021, “Treasury and IRS Announce
Families of 88% of Children in the U.S. to Automatical y Receive Monthly
Payment of Refundable Child Tax Credit”
 IR-2021-106, May 11, 2021, “IRS offers overview of tax provisions in American
Rescue Plan; retroactive tax benefits help many people now preparing 2020
returns”
 Treasury press release jy0069, March 18, 2021, “FACT SHEET: The American
Rescue Plan Wil Deliver Immediate Economic Relief to Families”
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Appendix D. Steps to Reconcile Excess Advance
Payments of the Child Credit Due to an Incorrect
Number of Qualifying Children
Table D-1 outlines the steps a taxpayer would take to reconcile any excess advance payments of
the child credit with the credit they are eligible to claim on their 2021 income tax return. In
addition, Table D-1 provides an il ustration of how the safe harbor would work. ARPA provides a
safe harbor in cases where a taxpayer receives excess payments due to a difference in the number
of children between the data used to estimate and advance the credit (general y 2020 tax data) and
the number of children they claim on their 2021 tax return. In cases where excess payments are
due to large changes in income between 2020 and 2021, changes in marital status, or changes in
principal place of abode, no safe harbor applies.
Table D-1. Steps for Reconciling Advance Payments of the Child Credit with the
Actual Credit on 2021 Income Tax Returns
For Excess Payments That Occur Due to an Incorrect Number of Qualifying Children
Example 1
Example 2
Steps to Reconcile
Single parent with 2 qualifying young
Single parent with 2 qualifying young
Excess Advance Payments of
children in 2020 and 1 young child/0
children in 2020 and 0 qualifying
the 2021 Child Credit
older children in 2021
children in 2021
Step 1: Determine “excess”
For example: If the taxpayer’s income For example: If the taxpayer’s income
credit.
is under $112,500 (in 2020 and 2021), is under $112,500 (in 2020 and 2021),
then:
then:
A. Calculate the total credit the
A. Total 2021 credit: $3,600
A. Total 2021 credit: $0
taxpayer is eligible for on their
2021 return.
B. Calculate the total amount they B. Total amount advanced: $3,600
B. Total amount advanced: $3,600
were advanced in 2021 (based on
(50% of $7,200)
(50% of $7,200)
2020 information).
C. Subtract the advance (B) from
C. Excess credit: $0 (=$3,600-$3,600) C. Excess credit: $3,600 (=$3,600-$0)
the total they are actual y eligible
for (A).
If B is greater than A, the taxpayer
The difference between the actual credit

wil have received an excess credit
they are eligible for in 2021 and the
(the difference between A and B). In
advanced credit is $0. The taxpayer wil
cases where the taxpayer has
effectively not receive a credit when they
received an excess credit, the
file their 2021 return, because they
taxpayer may need to repay some or already received it as the advanced
al of the excess (continue on to the
credit.
steps below).
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Step 2. Determine maximum Not applicable, no excess payment.

safe harbor amount.
A. Determine net difference

A. The net difference between (i) the
between (i) Number of qualifying
number of qualifying children from a
children used to determine
2020 tax return (2 children) used to
advanced credit and (i ) number
determine the advanced credit and
eligible for actual credit in 2021.
(i ) the number of children claimed on
a 2021 tax return (0 children) is 2
children.
B. Multiply (A) by $2,000.

B. 2 𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛 𝑥 $2,000 = $𝟒,𝟎𝟎𝟎

Step 3: Phaseout maximum
Not applicable, no excess payment.
safe harbor, if applicable.
Depending on income and filing
status in 2021, the maximum safe
harbor may be subject to
reduction.
No phaseout: If 2021 income is
No phaseout: If a single person in
less than or equal to the fol owing
2021 (i.e., single filer in 2021) has
thresholds, the safe harbor is not
income of $40,000 or less, their safe
reduced.
harbor is not reduced (i.e., it equals
$40,000 single filersa
the maximum safe harbor amount).
$50,000 head of household filers
$60,000 married joint filersb
Phaseout: The safe harbor is
Phaseout: If a single person in 2021
reduced ratably (i.e.,
has income between $40,000 and
proportional y) if 2021 income is
$80,000, the maximum safe harbor
between
phases out ratably in relation to
$40,000-$80,000
income in the phaseout range. For
single filersa
example, if income were $60,000 in
2021, the maximum safe harbor
$50,000-$100,000
would be reduced by:
head of household filers
$60,000−$40,000
$60,000-$120,000
[
]=50%
$80,000−$40,000
married joint filersb
A $4,000 safe harbor reduced by 50%
would equal $2,000.
No safe harbor if 2021 income is
No safe harbor: If a single person in
greater than or equal to
2021 has $80,000 or more in income,
$80,000 single filersa
their safe harbor amount is $0.
$100,000 head of household filers
$120,000 married joint filersb
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Step 4: Calculate the amount
Not applicable, no excess payment.
If income in 2021 for a single person
of any excess credit that
is:
needs to be recaptured (or
Under $44,000: Payback amount is $0
paid back) on 2021 tax
since the excess credit of $3,600 is
return:
less than the $4,000 safe harbor
Subtract the safe harbor amount
when income is $40,000 or less.
(determined after step 3) from
Between $40,000 and $44,000 the
the total amount of excess credit
safe harbor gradual y declines but is
(determined in step 1) in 2021.
stil greater than or equal to $3,600.
If the safe harbor amount is
$44,000+: Payback amount equals
greater than or equal to excess
$3,600 excess credit minus safe
payment, none of the advanced
harbor until income is $80,000 or
amount needs to be paid back.
more, at which point the total excess
credit of $3,600 needs to be repaid.
If income was $60,000, the safe harbor
would be $2,000, the single person
would need to pay back $3,600-$2,000
or $1,600 with their 2021 tax return.
If income was $80,000 or more, the
safe harbor would be $0, the single
person would need to pay back al
$3,600 in excess credit with their 2021
return.
Source: CRS analysis of P.L. 117-2.
Notes: Assumes advanced payment that would be received in 2021 would be based on 2020 income and family
structure (number of qualifying children and marital status). Broadly, income is assumed to be the same between
2020 and 2021 to isolate the impact of a changing number of qualifying children.
a. This includes married taxpayers who file separately.
b. This includes taxpayers who file as surviving spouses.

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Appendix E. The Child Credit and Residents of U.S.
Territories
Below is a summary comparing child credit receipt among residents of the territories, before
ARPA, in 2021 under current law as amended by ARPA, and after 2021 under current law as
amended by ARPA.
Table E-1. Child Tax Credit for Residents of the Territories
Post 2021
2021 Under Prior Law
2021 Under Current Law
Under Current Law
Territory
(Before ARPA)
(as amended by ARPA)
(as amended by ARPA)
Puerto
PR did not have a child credit
PR does not have a child
PR does not have a child
Rico (PR)
under its own internal revenue credit under its own internal
credit under its own internal
laws.
revenue laws.
revenue laws.

PR residents with three or
PR residents are eligible for
PR residents wil be eligible for
more qualifying children
the ful y refundable ARPA-
the ACTC using the
received the ACTC under the
expanded child credit (up to
alternative formula. The prior-
alternative formula.a Under
$3,600 per young child or up
law limitation of the
this formula, the ACTC
to $3,000 per older child).
alternative formula to only
effectively equaled 7.65% of

families with three or more
earned income up to the
PR residents wil claim the
children is eliminated.
maximum ACTC of $1,400
total 2021 federal credit
Effectively, PR residents are
per qualifying child. Residents
amount by filing a 2021 return
eligible for a credit equal to
with fewer than three
with the IRS directly.b The
7.65% of earned income up to
qualifying children did not
federal advance payment
the maximum ACTC per child.
receive the ACTC.
program of the ARPA-
From 2022-2025 the

expanded credit does not
maximum is $1,400 per
PR residents with three or
apply to PR residents.
qualifying child. Beginning in
more children claimed the
2026, the maximum amount of
federal ACTC amount by filing
the ACTC is $1,000 per
a return with the IRS directly.
qualifying child.
They did not receive the

ACTC via their territorial tax
system.
PR residents wil claim the
federal ACTC amount by filing
a return with the IRS directly.
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Post 2021
2021 Under Prior Law
2021 Under Current Law
Under Current Law
Territory
(Before ARPA)
(as amended by ARPA)
(as amended by ARPA)
American
AS appears to have a child
If AS has a plan approved by
If AS has a plan approved by
Samoa
credit under its own internal
the Treasury Secretary to
the Treasury Secretary to
(AS)
revenue laws that reflects the
distribute the ARPA-expanded distribute child credit amounts

parameters of the federal child child credit amounts to its
to its residents, Treasury is
credit in effect in 2000. (In
residents, Treasury is directed
directed to cover the total cost
2000, the child credit was
to cover the total cost of the
of child credit—the refundable
$500 per qualifying child and
ARPA-expanded child credit
portion (i.e., the ACTC) and
refundable for families with
as if American Samoa had a
nonrefundable portion—as if
three of more children under
mirror-code tax system. In
American Samoa had a mirror-
the alternative formula.)
addition, if AS chooses to
code tax system. From 2022
However, it is unclear in
provide advance payments of
to 2025, the maximum child
practical terms precisely how
the 2021 credit in a manner
credit amounts are $2,000 per
and to what extent residents
similar to the federal program
child, of which $1,400 may be
of American Samoa received
to advance the 2021 credit,
received as the refundable
the child credit under their
Treasury wil provide an
portion of the credit (i.e., the
own territorial tax system.c
additional $300,000 for
ACTC). From 2026 and
Available information suggests
administrative costs.
thereafter, the amounts are
that residents with three or

$1,000 per qualifying child, of
more children received the
which $1,000 per qualifying
If no such plan is established
ACTC as calculated under the
child may be received as the
and approved, AS residents
alternative formula. The IRS
ACTC. For these purposes,
can apply for the ARPA-
Chief Financial Officer (IRS-
the ACTC may be calculated
expanded credit by filing a tax
CFO) covered the costs of the
under the earned income
return directly with the IRS,
ACTC under the alternative
formula, which is general y
like residents of PR.
formula by making an
more generous than the
aggregate payment to the
alternative formula.f
territorial government. The

exact manner and timing in
If no such plan is established
which the territorial
and approved, AS residents
government then made direct
can apply directly with the IRS
payments to its residents is
for the ACTC calculated
unclear.e
under the alternative formula,

like residents of PR. In this

case, the prior-law limitation
of the alternative formula to
only families with three or
more qualifying children does
not apply (i.e., the same
treatment as residents of
Puerto Rico).
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link to page 37 link to page 37 The Child Tax Credit: Frequently Asked Questions

Post 2021
2021 Under Prior Law
2021 Under Current Law
Under Current Law
Territory
(Before ARPA)
(as amended by ARPA)
(as amended by ARPA)
Mirror-
Mirror-code territories by
Mirror-code territories by
Mirror-code territories by
Code
definition have a child tax
definition have a child tax
definition have a child tax
Territories
credit identical to the federal
credit identical to the federal
credit identical to the federal
(CNMI,
child tax credit in their own
child tax credit in their own
child tax credit in their own
Guam,
territorial tax code. Hence,
territorial tax code.
territorial tax code.
USVI).
residents of mirror-code
Residents of mirror-code
Hence, residents of mirror-
territories may be eligible for
territories are eligible for the
code territories may be
a child credit identical to the
ful y refundable ARPA-
eligible for a child credit
credit in the Internal Revenue
expanded child credit (up to
identical to the credit in the
Code (IRC). However, it is
$3,600 per young child or
Internal Revenue Code (IRC).
unclear in practical terms
$3,000 per older child).
From 2022 to 2025, the
whether and to what extent
maximum child credit amounts
residents of mirror-code
Residents of the mirror-code
are $2,000 per qualifying child,
territories actual y receive a
territories wil claim the
of which $1,400 may be
credit under their own
benefit on their territorial tax
received as the refundable
territorial tax laws.g
return. The law directs
Treasury to cover the total
portion of the credit (i.e., the
Available information suggests
cost of the ARPA-expanded
ACTC). From 2026 and
that residents with three or
child credit as paid out by
thereafter, the amounts are
more children received the
territorial governments
$1,000 per qualifying child, of
ACTC under the alternative
which $1,000 per qualifying
formula. The IRS-CFO

child may be received as the
covered the total cost of the
In addition, if a mirror-code
ACTC. The ACTC may be
ACTC under the alternative
territory chooses to provide
calculated under the earned
formula by making aggregate
advance payments of the 2021
income formula, which his
payments to the territorial
credit in a manner similar to
general y more generous than
governments. The exact
the federal program to
the alternative formula.f
manner and timing in which
advance the credit, Treasury

the territorial governments
wil provide an additional
then made direct payments to
$300,000 for administrative
Residents of the mirror-code
their residents is unclear.
costs.
territories wil claim the
benefit on their territorial tax

return. The law directs
Treasury to cover the total
cost of the child credit (both
refundable portion [i.e., the
ACTC] and nonrefundable
portion) as paid out by the
territorial government.
Source: CRS Analysis of Internal Revenue Code (IRC) §24, P.L. 117-2, and JCX-3-21.
Notes: This reflects current law and practice and is subject to change for legislative activity, as wel as additional
information. These summaries assume that residents of these territories general y only file a territorial tax return
with their local tax authority, and aside from claiming the ACTC, are not required to file a U.S. federal income
tax return. In cases where taxpayers are required to file a U.S. federal income tax return, they may be eligible to
claim the child credit on that return.
a. Under IRC §24(d)(1)(B)(i ), the alternative formula available to taxpayers with three or more qualifying
children is equal to the difference in the employee’s share of Social Security taxes and Medicare taxes and
their EITC. Since territorial residents are general y ineligible for the EITC, the alternative formula is
effectively 7.65% of earned income (i.e., W-2 wages, railroad retirement compensation, and self-
employment income) up to the maximum ACTC. The maximum ACTC in 2021 before ARPA was $1,400
per qualifying child and is scheduled to remain at that level from 2022 to 2025. Beginning in 2026, the
maximum ACTC is scheduled to be $1,000 per qualifying child.
b. IRS Form 1040-SS or Form 1040-PR.
c. While American Samoa’s internal revenue laws may reflect the credit in place in the Internal Revenue Code
for 2000, other forms available on the American Samoan website indicate that eligible residents may be able
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The Child Tax Credit: Frequently Asked Questions

d. to claim the ACTC under the alternative formula if they have three or more children. See Internal Revenue
Service, Bona Fide Residents of American Samoa - Tax Credits, https://www.irs.gov/individuals/bona-fide-
residents-of-american-samoa-tax-credits, and see schedule 8812 for AS Form 390 for 2020, available at
https://www.americansamoa.gov/tax-office. In addition, a 2019 local news article reported that the
maximum amount of the ACTC increased to $1,400 per child beginning in 2018, up from $1,000 per child,
reflecting changes made to the child credit as part of P.L. 115-97. See Talanei, “Additional Child Tax Credit
is now $1,400,” January 31, 2019, https://www.talanei.com/2019/01/31/additional-child-tax-credit-is-now-
1400/.
e. For example, an April 2019 American Samoan news article about delays in receiving American Samoan tax
refunds from 2018 returns stated: “Just in time for Flag Day and Easter, tax refund checks—for those who
qualify—wil be released today; but only the local y funded ones, it does not include the Additional Child
Tax Credit (ACTC), which is funded by the U.S. Internal Revenue Service.... For taxpayers expecting tax
refunds including the ACTC, ‘please be informed that al are on hold for now as we await a decision’ from
the IRS and the US Treasury Department.” Fili Sagapolutele, “Tax refunds to be issued today—but no
Additional Child Tax Credit yet,” Samoa News, April 12, 2019, https://www.samoanews.com/local-news/tax-
refunds-be-issued-today-no-additional-child-tax-credit.
f.
Under current law, the earned income formula is 15% of earned income above $2,500 up to a maximum of
$1,400 per child. This formula is in effect from 2022 through 2025. Beginning in 2026, the formula is
scheduled to be 15% of earned income above $3,000 up to a maximum of $1,000 per child.
g. For example, even if a territorial resident were eligible for the ful value of the child credit (both the
refundable portion [i.e., ACTC] and the non-refundable portion) under their own territorial income tax
law, the territorial government may have recaptured some or al that credit by enacting an excise tax credit.

Author Information

Margot L. Crandall-Hollick

Specialist in Public Finance

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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Congressional Research Service
R46900 · VERSION 3 · UPDATED
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