For 2021, the total credit for eligible families rose to as much as $3,600 for each child under 6 and up to $3,000 for ages 6 to 17. The credit also became fully refundable, so taxpayers can receive the money even if they owe no federal income tax.
The other change: You could receive half the credit upfront, in the form of monthly payments. Whether you took those payments or opted out, you’ll have to enter the amount you received on your return — even if it’s zero. (Joint filers will have to add theirs together.)
You should have received a form, I.R.S. Letter 6419, with this information. It, too, can be found by setting up an online I.R.S. account.
Some households will need to repay some or all of the advance: The payments were generally based on the prior year’s tax return and could have been too high if your situation changed significantly. There are repayment protections for lower- and middle-income households.
What’s happening with the child and dependent care credit?
This tax break helps many working parents offset the cost of caring for younger children and other dependents. Pandemic legislation made it far more generous, but only for 2021.
The dollar amount of qualifying expenses nearly tripled, and the percentage of those expenses that can be applied to the credit rose to 50 percent from 35 percent. It also lifted income ceilings on when the credit begins to phase out, making more families eligible. And because it became a fully refundable credit in 2021, you may receive money back even if you have no tax liability.