Question: Jessica and Nathan, a divorced couple, have one child, Lillian, age 4. Jessica and Nathan alternate tax years for claiming Lillian as a dependent. In 2020 Jessica claimed Lillian and received advanced child tax credit (CTC) payments totaling $1,800 in 2021. When Jessica files her 2021 tax return, her AGI is $50,000 with a filing status of single, since she is not the custodial parent in 2021. She heard about the repayment protection and asked how much, if any, of the advanced CTC she will have to repay. Does Jessica qualify for the repayment protection? How much will she have to pay back?
Answer: Yes, Jessica qualifies for partial repayment protection. Single taxpayers who have an AGI between $40,000 and $80,000 will qualify for partial repayment protection. The safe harbor amount available is $1,500, which is calculated by taking the safe harbor amount of $2,000, reduced by 25% or $500. The 25% is determined by the excess amount above the AGI safe harbor $10,000 ($50,000 - $40,000) divided by the lower limit of $40,000. Jessica will have to repay $300 ($1,800 - $1,500) of the advanced CTC payments.
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