The American Rescue Plan last month increases the child tax credit from a maximum of $2,000 to as much as $3,600 per child. It will include the option for families to receive monthly installments.
While details of the monthly payment plan have yet to be revealed, here’s what we know about the increased child tax credit and who qualifies:
How will the Child Tax Credit work?
For this year only, the child tax credit has increased from $2,000 per child to $3,000 per child. Parents of children under age 6 would be eligible for an even larger $3,600 total credit. The plan also includes $3,000 benefits to the parents of 17-year-olds who meet plan qualifications. Previously children had to be 16 or younger.
Who qualifies for the additional Child Tax Credit?
For this year only, the child tax credit has increased from $2,000 per child to $3,000 per child. Parents of children under age 6 would be eligible for an even larger $3,600 total credit.
The plan also includes $3,000 benefits to the parents of 17-year-olds who meet plan qualifications. Previously children had to be 16 or younger. The credit is also fully refundable.
Child tax credit phase out — here’s what we know:
For the standard $2,000 child tax credit, the phase out starts at $400,000 if filing jointly. According to the relief plan signed earlier this month, the additional credit will phase out for single filers at $75,000 and joint filers at $150,000.
How will monthly payments work?
While some details are yet to be revealed, here’s what it says in the bill:
“The secretary shall establish a program for making periodic payments to taxpayers which, in the aggregate during any calendar year, equal the annual advance amount determined with respect to such taxpayer for such calendar year.”
According to reports, regular check distribution would begin no sooner than July and would be an advance on up to half of the total benefit. So a family receiving the benefit for one child under the age of 6 would see $300 monthly payments for six months. Between ages 7 and 17, the benefit would be $250 monthly, if approved.
It remains unclear if filers will be given the option to decline monthly payments and opt to take the full tax credit when filing their 2021 taxes.
What is the intended impact of the Child Tax Credit increase?
In pushing the credit, Democrats have said this change — in conjunction with stimulus payments, childcare credits, and other relief for parents in President Joe Biden’s proposal — could reduce the number of children living in poverty by more than half, a claim based on a study by the Center on Poverty and Social Policy at Columbia University.
Several experts have suggested that this package could halve child poverty, as has been widely reported.
When is the 2020 tax deadline?
The IRS announced on Wednesday it will delay the April 15 tax deadline until May 17.
“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”
This would be the second consecutive year the IRS has delayed the federal tax filing deadline. Last February, the deadline to file and pay 2019 federal income taxes was extended to July 15.