Father’s Day child tax credit tip, along with other tax breaks for all parents

June 21, 2020

Reviewed and updated June 21, 2021, with special attention on new Advance Child Tax Credit payments

There are an estimated 72 million fathers in the United States, according to the U.S. Census Bureau's latest complete data, which is for 2014.

Last year, say the country's official statisticians, around 24 million of these men were in married relationships where they and their spouses were raising children younger than age 18.

Another 2 million men in 2019 were single fathers. On Father's Day 2020, these men doing the critical child care job alone earn this week's By the Numbers honors. (Check out 2021's By the Numbers, too. There's another Father's Day post there.)

First dad's day for single pop: That last figure also is notable not just because of recognition by the ol' blog or because it's hard to be a single parent, but also because it was a single dad who was the catalyst for the annual Father's Day that we are celebrating today.

More than a century ago, Sonora Dodd of Spokane, Washington, came up with the idea of a special day to honor her father, William Smart.

Smart was a widower raising six children alone on his farm after the death of his wife. This was uncommon at that time, as many widowers placed their children in the care of others or quickly remarried.

Dodd pushed to see her father's commitment to his children recognized and June 19, 1910, was chosen for the first Father's Day. This day to celebrate dads has been an official annual one since 1972, when President Richard Nixon signed the public law that made it permanent.

Giving dad his due: Over the years, the roles of dads have changed, dramatically in many cases. We've gone from the era when a father was just the breadwinner, gone most of the day and leaving child rearing mostly to mom, to a time when fathers are more actively involved in their children's lives.

This changing role of fathers has introduced new challenges as dads juggle the competing demands, detailed in a Pew Research Center analysis, of family and work. Graphic inserted to left

Regardless of which fathering style you've chosen or your familial status, I hope all the dads and their children share a wonderful Father's Day. It might be a bit more difficult this year due to COVID-19 restrictions across the country and personal financial and physical considerations.

Still, enjoy each other's company, in real life or virtual. And be patient with each other now and when the coronavirus allows for more interactions.

Mostly love each other and tell each other that you do. Often. That's an option that current conditions have made us all too aware could change in a moment.

Dads and taxes, too: When things do get back to whatever will be normal, remember that being a parent also provides some tax breaks.

The most popular and easiest to claim is the Child Tax Credit (CTC).

Under the Tax Cuts and Jobs Act (TCJA) provisions in effect through 2025, the child tax credit could get eligible parents a maximum credit of $2,000 per qualifying child. A qualifying child is one who, among other things, is younger than age 17.

Since it's a tax credit, it's a dollar-for-dollar reduction of any tax you owe. Even better, up to $1,400 of the CTC can be refundable, meaning that if you don't owe any taxes, the excess comes back to you as a refund.

In addition, the TCJA bumped up the income threshold at which the CTC begins to phase out to $200,000 or $400,000 if married filing jointly. This income increase means that more families qualify for the larger credit.

2021 tax year coronavirus CTC changes: The CTC was further tweaked for tax year 2021. To help parents facing economic difficulties due to the COVID-19 pandemic, the credit was expanded in March 2021 when the American Rescue Plan Act (ARPA) became law.

The $2,000 child-related tax break was hiked for the 2021 tax year to $3,600 for each child age 5 and younger. It goes in 2021 to $3,000 each child between ages 6 and 17.

Even better, the entire credit is fully refundable for 2021. This means that if your credit amount exceeds what you owe, you can get the full remainder as a refund. Previously, if you had more CTC than tax liability, a maximum of $1,400 per child was refundable.

Finally, the ARPA offers qualifying families the chance to get some of the CTC early, instead of waiting until 2022's tax-filing season to claim the increased 2021 amounts. These Advance Child Tax Credit (ACTC) payments of up to $300 will be sent to qualifying families beginning July 15 and continue monthly through the rest of 2021.

Some families eligible for the advance payments have or soon will be getting letters from the Internal Revenue Service with information about their specific ACTC circumstances. Others who believe they qualify but who haven't filed a recent tax return and therefore aren't in the IRS system can register for possible ACTC payments using the agency's new online tool for nonfilers.

Qualifying child requirements: The key to claiming the basic CTC is, obviously, having a qualifying child.

The TCJA added a new requirement to meet this designation. The tax reform law demands that the child must have a Social Security Number (SSN) issued by the Social Security Administration before the due date (including extensions) of the tax return on which the CTC will be claimed. A child with an ITIN or ATIN can’t be claimed for either credit.

In addition to obtaining an SSN, the child must also meet all of these other conditions:

The child must be, as noted earlier, younger than age 17 at the end of the tax year.
The child is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or a descendant of any of them (for example, your grandchild, niece, or nephew).
The child did not provide over half of his or her own support for the tax year in which he or she is claimed.
The child lived with you for more than half of the tax year. There are exceptions to time lived with you, noted a few paragraphs later.
The child is claimed as a dependent on your return.
The child does not file a joint return for the year or files it only to claim a refund of withheld income tax or estimated tax paid.
The child was a U.S. citizen, U.S. national or U.S. resident alien.

Adoptions count: If your child joined your family via an adoption, that's fine as far as the CTC is concerned.

An adopted child is always treated as your own child. An adopted child also includes a child lawfully placed with you for legal adoption.

Living with you exceptions: While Census data shows most children are part of traditional families, there are exceptions. The IRS realizes this, too.

When it come to the time lived with you CTC requirement, temporary absences are taken into account.

These include special circumstances, such as school attendance, vacation, business, medical care, military service or detention in a juvenile facility. In all of these cases, the time in which you were temporarily apart still counts as time the child lived with you.

More tragic circumstances also are considered. When a child has passed away, tax law says the child is considered to have lived with you for more than half of the tax year if the youngster was born or died during the tax year and your home was this child's home for more than half the time he or she was alive.

There also are exceptions for kidnapped children. While it's not high on their concerns, parents of a missing child generally can, under certain conditions, still consider the child as a dependent and take the child tax credit.

More tax breaks for dads (and moms): While the tax help of the CTC is a valuable tax code gift at filing time, right now pop probably will find a little free time to relax a more welcome Father's Day present.

"There should be a children's song: 'If you're happy and you know it,keep it to yourself and let your dad sleep.'" — Comedian and father of five Jim Gaffigan
Image via GIPHY

Once you wake up from your Father's Day nap, which might be like the one above a brief break, you can check out the following many other child-related tax benefits that Uncle Sam offers all parents:

Bonus blog: I just linked to this post at my tumblr blog Tumbling Taxes. Why is it worth a click over there? Because that Father's Day item has the trailer to the 1997 film "Father's Day," starring the late, great Robin Williams.

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