Will you have to repay child tax credit payments?

Q: If the IRS sent me too much money for the child tax credit in 2021, will I have to repay it?

A: Maybe. The law authorizing the monthly child credit payments specifically says that any excess amounts must be paid back when you file your 2021 tax return if your income is above a certain amount. There are exceptions to this rule for middle- and lower-income families, but they’re limited. Plus, the way the monthly payments were calculated, overpayments could be fairly common.

Depending on your income, you might have to pay some or all of it back as an addition to the tax you owe when you file your 2021 return.

Lower-income people get a good deal. If your modified Adjusted Gross Income (AGI) for 2021 doesn’t exceed $40,000 (single filers), $50,000 (head-of-household filers) or $60,000 ( joint filers), and your principal residence was in the U.S. for more than half of 2021, you won’t have to repay any overpayment amount — a win for you!

On the other hand, parents with higher incomes don’t get any breaks at all. If your modified AGI for the 2021 tax year is at least $80,000 (single filers), $100,000 (head-of-household filers) or $120,000 ( joint filers), you must repay your entire overpayment.

It’s a little more complicated for people in the middle. All or part of your overpayment might be forgiven if your modified AGI for 2021 is between $40,000 and $80,000 (single filers), $50,000 and

$100,000 (head-of-household filers), or

$60,000 and $120,000 ( joint filers).

Q: Can you explain how Social Security benefits are taxed? And is there any possibility that Congress will allow retirees to keep more of their benefits from taxation?

A: To find out whether your Social Security benefits are subject to taxation, you first need to figure out your “provisional income.” That’s your adjusted gross income plus tax-free interest from municipal bonds and 50% of your Social Security benefits.

If your provisional income is below

$25,000 ($32,000 on a joint return), the benefits are tax-free. If your provisional income is between $25,000 and $34,000 on a single return, or between $32,000 and $44,000 for joint filers, up to half the benefits are taxable. For provisional income over $34,000 for singles ($44,000 for couples), up to 85% of your benefits are taxable.

Congressional Democrats want more Social Security benefits to escape tax. A bill introduced in the House in October would make Social Security benefits tax-free for single filers with provisional income below $35,000 ($50,000 for joint filers). That bill would also have the 6.2% Social Security tax for employees and employers kick in again for workers with wages over

$400,000. The current annual wage base at which Social Security tax is capped is

$147,000 for 2022.