Like the US$1,400 payments that were sent out earlier this year, not everyone will get the Child Tax Credit – it will depend on the income level of each household.
- On July 15, millions of American families will begin receiving as much as US$300 in monthly payments as part of something known as the Child Tax Credit.
- These payments are part of the US$1.9 trillion American Rescue Plan that was passed by Congress and signed into law by President Joe Biden in March.
- In late April, when Biden gave his first address to Congress, he said the American Rescue Plan meant the country was “on track to cut child poverty in America in half this year.”
- The amped up Child Tax Credit is the main reason for that rosy prediction.
How much is the Child Tax Credit?
- Like the US$1,400 payments that were sent out earlier this year, not everyone will get the Child Tax Credit – it will depend on the income level of each household.
- The maximum amount someone can get from the tax credit is US$3,600 a year, which translates to US$300 a month.
- That’s the number that often pops up in headlines and talking points, but it’s the very most someone will receive per child.
- That number is for children under six. For children between the ages of six and 17, the maximum payments are US$250 a month (or US$3,000 a year).
- The tax credit is mostly intended to benefit poorer families, which is why it is expected to help cut child poverty.
- If you’re a parent and you file as single on your tax forms, you can receive the tax credit if your taxable income is US$75,000 or less. The amount for couples filing together is twice as much.
- Other than income level, the main requirement is that the child lives with the parent for at least six months of the year. Both the parent and child must be citizens of the United States.
- The Child Tax Credit is also refundable, which means that if what you pay in taxes is less than the credit you’ve earned, you’ll be refunded the difference.
Did Biden create the Child Tax Credit?
- Nope. The Child Tax Credit has been around for years.
- But what Biden’s administration did was ramp up the payments from a maximum of US$2,000 per child to US$3,600.
- In the 2017 Tax Cuts and Jobs Act, the Trump administration had pushed up the amount from US$1,000 to US$2,000.
How long will the Child Tax Credit last?
- Since this version of the Child Tax Credit was passed with the COVID-19 relief package, it wasn’t designed to last forever.
- But Biden has already proposed extending the payments until 2025 as part of his American Families Plan.
- Many Democrats in Congress are also hoping to make the tax credit permanent, a move that Biden reportedly supports, but this could be a hard sell among Republicans.
- Not a single Republican in Congress voted for the American Rescue Plan and there have been questions about how the tax credit, which some estimates put at US$100 billion a year, will be paid for.
- But raising people out of poverty has long been considered an excellent way to improve the economy overall, which would increase tax revenue elsewhere.
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