What changes to the Child Tax Credit did President Joe Biden’s American Rescue Plan Act introduce in 2021?
Executive summary
The American Rescue Plan Act (ARPA) of 2021 temporarily expanded the Child Tax Credit (CTC) for the 2021 tax year by raising the per-child maximum to $3,000 for children ages 6–17 and $3,600 for children under 6, making the credit fully refundable, extending eligibility to 17‑year‑olds, and authorizing advance monthly payments from July–December 2021 [1] [2] [3]. The expansion included new income phase‑out thresholds for the increased amounts (commonly cited as $150,000 joint, $112,500 head‑of‑household, $75,000 single or, alternately, separate phase‑out rules for the increased portion) and the changes were temporary unless Congress acted to extend them [1] [4] [5].
1. Big-dollar increase and age expansion: more money for more kids
ARPA boosted the CTC’s face value for 2021 from the pre‑existing $2,000 per child to $3,000 for each child ages 6 to 17 and to $3,600 for each child under 6, and it explicitly allowed 17‑year‑olds to qualify where previously only children 16 and under did [1] [2]. Multiple reporting and agency summaries emphasize the larger annual amounts — $3,600 and $3,000 — as the headline change [6] [2].
2. Fully refundable status and monthly advance payments: cash flow up front
For 2021 the ARPA made the expanded credit fully refundable, meaning families could receive it regardless of their tax liability, and it authorized the IRS to send advance payments — roughly half the credit — via monthly checks or deposits from July through December 2021 rather than waiting until a tax refund after filing [3] [7] [8]. Reports and IRS guidance describe the program as a first‑of‑its‑kind monthly advance of a tax credit aimed at increasing household monthly cash flow [9] [3].
3. Income phase‑outs and eligibility lines: who got the full increase
ARPA introduced phase‑out rules for the expanded amounts. Many sources report that the larger credit begins to phase out for higher earners — commonly cited thresholds include $150,000 for married couples filing jointly, $112,500 for heads of household, and $75,000 for single filers — while noting that families above those lines might still claim the pre‑existing $2,000 credit subject to its normal limits [1] [4] [10]. Some practitioners described a second set of phase‑out rules specific to the increased portion of the credit, creating complexity for taxpayers [10].
4. Interaction with other child‑and‑dependent rules: wider tax changes in ARPA
ARPA also made related, temporary changes to other family tax benefits for 2021 — for example, it adjusted the Child and Dependent Care Credit (raising the maximum credit rate to 50% for 2021 and changing phase‑down thresholds) — reflecting that the law’s family‑support provisions arrived as a package rather than as a standalone CTC tweak [11] [12]. Analysts cautioned policymakers and the public that these were largely time‑limited changes focused on pandemic relief [4].
5. Temporary design and political context: not permanent unless extended
Contemporary fact‑checks and later commentary underline that the ARPA expansions were temporary measures for the 2021 tax year unless Congress extended them; ARPA also included the administrative mechanism to deliver advance payments, which IRS materials and reporting documented as being rolled out mid‑2021 [5] [8] [3]. Some sources note President Biden expressed a desire to make expansions permanent, but the law itself set expiration unless further legislative action occurred [5].
6. Practical effects and tradeoffs to consider
Advocates and analysts highlighted immediate poverty‑reduction and liquidity benefits from advance monthly payments and full refundability, while critics and some fiscal analysts warned about the temporary cost and administrative complexity of advance payments and phase‑in/phase‑out rules [4] [7]. Available sources do not mention long‑term empirical estimates of the program’s full effects beyond contemporaneous reports and government descriptions (not found in current reporting).
7. What this means now: lingering questions for policymakers and families
The ARPA changes significantly altered who got help and when in 2021 by increasing amounts, expanding age eligibility, making the credit refundable, and front‑loading payments — but the expansion was structured as a one‑year change that required further congressional action to continue [1] [3] [5]. Policy debates since have centered on whether to make the expansion permanent, how to simplify phase‑outs, and how to measure the program’s effects on child poverty and labor markets [4] [5].
Limitations: this summary relies on contemporaneous reporting, IRS guidance and tax‑advisor analyses in the provided sources; available sources do not mention every granular administrative rule or the final reconciliations taxpayers experienced when filing 2021 returns (not found in current reporting).