At the beginning of May 2022, the Internal Revenue Service (IRS) issued guidance regarding how bona fide Puerto Rico residents claim the Child Tax Credit (CTC) for the 2021 tax year. The guidance includes simplified procedures that allow such residents who were not required to file a federal tax return in 2021 to now claim the CTC through a simplified federal tax return, which is detailed in Revenue Procedure 2022-22. Bona fide residents of Puerto Rico may now claim the full amount of the CTC for the 2021 tax year even if they had no income, did not file a 2021 federal tax return or paid no taxes to Social Security.
How Puerto Rico Residents Can Claim the Child Tax Credit
According to the guidance, bona fide residents of Puerto Rico who have children but do not have a federal filing requirement for the 2021 tax year may utilize this simplified method to claim the CTC for the 2021 tax year and for future tax years if they meet the following requirements:
- Their income for the 2021 tax year is completely exempt from taxation due to being sourced within Puerto Rico.
- Their modified adjusted gross income for purposes of the CTC is less than or equal to
- $150,000 if married and filing jointly or filing as a surviving spouse;
- $112,500 if filing as head of household; and,
- $75,000, if a single filer or married and filing a separate return.
- They are eligible to claim the CTC in an amount greater than zero.
- They are a U.S. citizen or resident alien, or are treated as a U.S. resident.
- They are not required to file a Form 1040-PR, Form 1040-SS, Form 1040 or Form 1040-SR for the 2021 tax year for the purpose of reporting tax on self-employment income.
- They have not already filed a paper or electronic Form 1040-PR, Form 1040-SS, Form 1040 or Form 1040-SR for the 2021 tax year.
Under the American Rescue Plan Act (ARPA), the CTC credit amount was increased from $2,000 per qualifying child to $3,600 for children ages 5 and under and $3,000 for children ages 6 through 17, and also made the credit fully refundable.
For more information about the CTC and the new guidance, reach out to your Windham Brannon advisor, or contact Nicole Suk.
