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For the year 2021 I received $1200 Total Advance Child Tax Credit. My spouse also received $1200 Total Advance Child Tax Credit. When I go to Turbo Tax and enter this amount

Myself: $1200 Spouse: $1200 Total: $2400

When I enter the amount, my tax owed goes up? Why?

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    It is likely that your tax preparation software credited you with the full tax credit as soon as you entered your dependent information, lowering your tax owed by that full amount. Entering the $2400 tells the software that you already received some of that tax credit, so they have to back it back out.
    – tbrookside
    Feb 14, 2022 at 2:59
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    Related: Stimulus Payments Increased the Tax Owed
    – Ben Miller
    Feb 14, 2022 at 5:15
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    I think all this “free” money did was confuse people. Just go search turbotax and you’ll find thousands of people who are confused on their taxes this year. All of that talk about helping US families was nothing more then confusion and absolutely no help!
    – JonH
    Feb 15, 2022 at 4:48
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    I have 5 kids and wound up owing $2k at end of the year. They should have reduced the monthly payment so as not to incur tax penalties at end-of-year.
    – Ian
    Feb 15, 2022 at 18:03
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    @JonH People got more money than they would have otherwise, to the tune of thousands of dollars more. How can that possibly be described as "absolutely no help?" Feb 16, 2022 at 0:04

2 Answers 2

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CNN: Brace for a smaller tax refund if you got monthly child tax credit payments in 2021

To take a simple example, parents of one teenager used to receive a $2000 tax credit for their kid. In 2021 that kid was worth more, $3000, but half of that $3000 was paid in advance. Thus the $1500 remaining to claim on the parents' 2021 return results in a smaller refund than they had in 2020, (a $1500 credit in 2021 versus the $2000 credit in 2020).

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If your salary is $5k a month, and you get an advance of $1k, then next month you'll be paid only $4k. You have a fixed amount of money that you're owed. Any money you get now is money you're not getting later. Similarly, you were owed $2400 of tax credit, but you already took that money, so that amount is subtracted from the amount that you're given now (or added to the amount you have to pay). It's not that the tax credit increases tax owed, it's that the fact that you already took the credit increases your tax owed, compared to if you still had the tax credit available to apply towards your tax owed.

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