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If you’re feeling a mix of excitement and confusion about the Child Tax Credit, you’re not alone. The good news? It’s happening! Think of it as an early holiday gift for many families, as the enhanced child tax credit is set to begin on July 15. This initiative is part of the American Rescue Plan, signed by President Joe Biden earlier this year.
So, what does this mean for your family, and do you qualify? Let’s break it down:
What’s New with the Child Tax Credit?
Previously, the child tax credit provided families with $2,000 annually for each dependent under 17. The new legislation increases this amount to $3,000 per dependent, plus an additional $600 for children under the age of six.
Who is Eligible?
Who is eligible for this crucial financial support? According to CNBC, “The full credit is available for families with an adjusted gross income of less than $75,000 for single parents and $150,000 for married couples filing jointly. The enhanced credit phases out for individuals earning $95,000 and couples making $170,000, though they will still qualify for the standard child tax credit, resulting in lower monthly payments starting in July.”
Criteria for Early Tax Credit Payments
To qualify for early tax credit payments, you must meet certain criteria. You should have filed a 2019 or 2020 tax return claiming the Child Tax Credit or provided your information to receive the Economic Impact Payment. Additionally, you must have maintained a primary residence in the U.S. for over half the year, have a qualifying child under 18 with a valid Social Security number, and your income must be below specified limits.
Payment Schedule
Eligible families won’t need to wait until they file their 2021 taxes to access these benefits. Payments will start arriving in just a few weeks and continue until December 2021. “For children aged 6 to 17, the credit will amount to $250 per month, while those under six will receive $300 per month,” CNBC reports.
This is your money, and you won’t be required to pay it back. The enhanced tax credit not only increases the amount but also allows families to receive it in smaller, more manageable installments rather than one large sum, which is especially beneficial right now.
How Will You Receive These Payments?
If you filed a 2019 or 2020 tax return and qualify, you likely won’t need to take any additional action. About 80% of eligible recipients will receive payments via direct deposit. If the IRS lacks your direct deposit information, expect a paper check or a debit card in the mail. The IRS states, “Future payments will be issued on the 15th of each month, except when that date falls on a weekend or holiday, in which case payments will be sent on the nearest business day.” After filing your 2021 taxes, you’ll receive the remaining half of the enhanced child tax credit.
Why This Matters
This initiative is a significant step towards universal basic income for parents, and here’s why it matters: The enhanced child tax credit will benefit 88% of American families with children, potentially lifting over four million children out of poverty and providing crucial support for families struggling to make ends meet. President Biden has proposed extending this child tax credit until 2025, with some lawmakers advocating for it to become a permanent fixture.
Can I get an enthusiastic cheer? As a parent of three who chose to stay home to avoid the high costs of daycare, I wholeheartedly support making this a permanent benefit, even though my kids won’t be dependents much longer. It will provide a safety net for my children when they start their own families, helping them avoid financial struggles during tough times.
Celebrate This Positive Change!
Let’s celebrate this positive change together! If you’re unsure about the amount you can expect, feel free to check out this calculator that can help you determine your potential benefits.
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Summary
The enhanced Child Tax Credit will begin disbursing payments on July 15, providing much-needed financial support to families. Eligible parents can expect increased monthly payments based on their children’s ages, with the total amount being distributed in installments through December 2021. This initiative aims to lift millions of children out of poverty and could become a permanent resource for families in need.