An expansion of the Child Tax Credit program, approved through the $1.9 trillion American Rescue Plan, will provide additional financial assistance to struggling families, but when is the money expected to start flowing in?
The Child Tax Credit has been expanded for 2021 from $2,000 per child annually up to as much as $3,600 per child.
Families will receive $3,600 for each child under the age of 6, while receiving $3,000 for each child between the ages of 6 and 17.
However, when and how Americans will start seeing this money is a bit complicated, and could vary depending on individual preference.
Under the new plan, families will receive half of their Child Tax Credit via advanced monthly payments, while the other half will be claimed on the resident’s 2021 tax return, to be filed by mid-April 2022.
For example, a family with a 4-year-old and 7-year-old child would be eligible for $6,600 in Child Tax Credit benefits; $3,600 for the 4-year-old and $3,000 for the 7-year-old.
This family would receive monthly payments of $550 from July through December of this year, totaling $3,300 over the six month span.
The family would then receive the remaining $3,300 through their tax return.
This change in the delivery of the Child Tax Credit was designed to ensure monthly income for needy families while also providing them with a lump sum when they file their annual tax return.
However, Americans who would rather receive their entire Child Tax Credit as a lump sum when they file their 2021 taxes can opt out of the monthly advanced payments model.
This means that these residents would not receive any payments between July and December, but would receive their full Child Tax Credit as part of next year’s tax return.
The U.S. Treasury is currently in the process of designing an online portal for the Child Tax Credit that will allow taxpayers to opt out of the advance payments in favor of a lump sum.
As of now, the expansion of the Child Tax Credit program has only been approved for 2021, though some lawmakers have voiced a desire to make the change permanent.
ARE ALL PARENTS ELIGIBLE?
Like the stimulus checks, the expanded Child Tax Credit benefits include reductions and cutoffs for individuals earning higher incomes.
The full $3,000 and $3,600 credits will be available to individual tax payers earning less than $75,000 and married couples earning under $150,000.
However, payments will be reduced for anyone earning above the aforementioned thresholds.
The expanded benefits will be reduced by $50 for every additional $1,000 in income over the $75,000 and $150,000 thresholds.
The reduction in benefits will level off at $2,000 per child for those earning higher incomes, though individuals earning more than $200,000 and couples earning more than $400,000 will not qualify for Child Tax Credit benefits at all.