By Noah Rothstein
On July 15, most eligible families in the U.S. got their first monthly payments of the expanded child tax credit.
The payments, a part of the American Rescue Plan, change an existing tax credit by expanding the eligibility pool and increasing the money families receive. Under the expanded credit, the IRS offers the option to receive the payments monthly rather than in a lump sum as a tax refund.
The expanded payments are expected to decrease the number of children living in poverty dramatically. The White House claimed that child poverty could be reduced by as much as 50%.
“This major middle-class tax relief and step in reducing child poverty is a remarkable economic victory for America — and also a moral one,” Treasury Secretary Janet Yellen said in a statement.
Most of the roughly 39 million eligible families have filed taxes recently or got stimulus checks and do not need to take any additional steps to receive the monthly benefit. However, an estimated 4 million to 8 million eligible children are at risk of missing out because their families are not required to file taxes or have not done so.
Non-filing households tend to be more vulnerable and the most in need of assistance. Although the Biden administration has rolled out several online portals where families can update their information, cumbersome government websites, language and technology barriers, and a general lack of public awareness threaten the program’s impact.
People who claim children 17 or younger on their taxes are eligible.
The full enhanced credit will be given to single filers who earn as much as $112,500 and joint filers making up to $150,000 a year. The payments begin to decrease for those making more, with the credit completely phasing out for single payers earning more than $200,000 and married couples with incomes above $400,000.
The IRS determines a child’s age by how old the child is at the end of the 2021 calendar year. Children turning 18 this year will not be eligible.
There are no work requirements for the credit, and Americans do not need a permanent home to claim them. Parents eligible for the full enhanced credit will get $300 a month per child under age six and $250 a month per child ages 6 to 17.
The payments max out at $3,600 annually for each child under six and $3,000 for those ages six to 17.
The credit is fully refundable, meaning families can still benefit even if they have no earned income or do not owe income taxes.
The IRS plans to send direct deposits on the 15th of each month. It will distribute payments on August 13 (this payment is early because the 15th falls on a Sunday), September 15, October 15, November 15, and December 15.
The expanded credit ends in December. President Joe Biden has called for a four-year extension, which would need congressional approval. Other Democrats have called for making the expansion permanent.
