Enhanced child tax credits are one component of the American Rescue Plan, Joe Biden’s financial package aimed at getting America back up and running as effects of the pandemic continue. Qualifying families could receive up to $3,600 per child, per year, depending on their circumstances, with a portion of that paid out in child tax credit payments beginning July 2021.
Who Qualifies for Child Tax Credits?
Around 90% of families should qualify for some amount of tax credits, meaning they will receive a monthly payment from the IRS based on how many kids they have, how old the kids are, and how much money the household makes. There are, of course, limits to this. The thresholds are as follows:
- Individual taxpayers must earn less than $75,000.
- Heads of household must earn less than $112,500.
- Married taxpayers who file jointly or widows/widowers must earn less than $150,000.
For every dollar earned above these thresholds, payments are reduced by 5 cents. The upper thresholds may be changing, based on a bill introduced in May.
For families that don’t qualify, the hope is that this is because the family is financially sound and not in need of monetary assistance. If that’s not the case, there are other types of support available in the form of child and dependent care credit, and the IRS is sending supplemental stimulus payments to those who qualify.
How Much Will Families Receive?
Each child is eligible for up to $3,600 tax credits if under 6 years old, or $3,000 if between ages 6 and 17. These credits are normally based on income filed, but the 2021 tax year isn’t due to be filed until next year. That’s why these enhanced child tax credits are classed as advance payments, as families will receive up to $300 per child per month from July 2021 until the end of the year, for a maximum of $1,800 per child.
A family of five with three kids aged 3, 5, and 7 could expect to receive $850 per month, although the income level of the household may affect that payment amount.
When Can Families Expect Payment?
The first child tax credit payments are scheduled for July 15 and families should expect subsequent payments on the 15th of each month thereafter, except where the 15th falls on a non-banking day. The payments for 2021 are based on what income families or individuals are expecting to file once they do their 2021 taxes. Overpayments or underpayments will be corrected in 2022.
Although this enhanced child tax credit scheme is set to expire in December, the American Families Plan is already seeking to extend it for four more years. This would mean many families would see the support until 2025 unless their household or individual income went above one of the threshold levels.
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