Child Tax Credits: What to Know About ‘Repayment Protection’ for Lower-Income Families

by Victoria Santiago

Child tax credits can be confusing when filing your tax return. Thankfully, the IRS has guidelines in place to help make filing easier.

Many are probably wondering if they’ll owe money to the IRS due to child tax credits. The short answer: maybe. It depends on a few things, though.

What Happens If I Got Overpaid in Child Tax Credits?

Last year’s payments were based on 2019 or 2020 tax returns. If your financial situation has changed since you last filed, you could’ve been overpaid. If that’s the case, you could owe the IRS money.

For the majority of people, they automatically got half of their estimated amount in 2021 from the IRS. However, if you chose to opt out of the monthly payments, that simply means you’ll get your money when you file. Thus, overpayment won’t apply to you.

If you did get monthly payments, there are a few different situations that could cause you to get overpaid in child tax credits. For example, if:

  • Someone in your household got a better-paying job that pushed you above or out of an income bracket
  • One of your dependents aged out of an age bracket last year (5-year-old turns 6, 17-year-old turns 18)
  • There’s a change in custody (parents divorce, or if custody changes every year)
  • Your main home was in the U.S. for more than half of 2020, but not 2021. In this case, you’d no longer qualify for payments

Situations like these are a big reason that the IRS gave households the opportunity to opt out of advance child tax credit payments.

Even If You Got Overpaid, That Doesn’t Necessarily Mean You Owe

Even if you got more money than you should have, you might not have to pay. This is thanks to what the IRS calls “repayment protection.”

If your household’s adjusted gross income (AGI) for 2021 was below a set income level, you most likely won’t owe anything. This is so lower-income families won’t be on the hook to repay any money. Above a certain income level, the amount you must pay back increases until you owe the full repayment. Here’s what that looks like for filers:

  • single filers making up to $40,000 qualify for repayment protection
  • head of household filers making up to $50,000 qualify for repayment protection
  • those that are married and filing jointly can make up to $60,000 and be covered

According to CNET, if you make more than those numbers above, that doesn’t mean you’ll owe the full amount right away. The IRS sent out a letter about child tax credits that can help you determine if you got overpaid and if you’ll need to pay anything back. You’ll need the information in this letter to file your taxes. If you haven’t gotten it, make sure your mailing address is correct. You’ll be able to update it through the Child Tax Credit Update Portal.