Your 2021 modified adjusted gross income (AGI) reduces the amount of your Child Tax Credit (CTC) through a phased reduction process. This reduction occurs in two steps:
- First Phaseout:
- The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI exceeds certain thresholds:
- $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower.
- $112,500 if you are filing as head of household.
- $75,000 if you are a single filer or are married and filing a separate return.
- The reduction is $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the applicable threshold.
- For example, if your family has one 10-year-old qualifying child, the Child Tax Credit is reduced to $2,000 if your modified AGI exceeds:
- $169,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower.
- $131,500 if you are filing as head of household.
- $94,000 if you are a single filer or are married and filing a separate return.
- Second Phaseout:
- After the first phaseout reduces the Child Tax Credit to $2,000 per child, the second phaseout can further reduce the remaining Child Tax Credit down to zero per child.
- The specific thresholds and reduction rates for the second phaseout are not detailed in the provided information, but it follows a similar structure of reducing the credit based on the excess of modified AGI over certain thresholds.
Modified AGI Calculation:
- Your modified AGI for the Child Tax Credit is your adjusted gross income (AGI) plus:
- Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
- Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.
- If you do not have any of the above, your modified AGI is the same as your AGI.
In summary, the reduction of the Child Tax Credit is based on your modified AGI exceeding specific thresholds, with the credit being reduced by $50 for each $1,000 (or fraction thereof) over the threshold, first down to $2,000 per child and then potentially to zero.
Sources:
§ 24. Child tax credit
Publication 501 (2023)
Publication 3 (2023)
