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?
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).
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.
