in her words
An expanded Child Tax Credit will be distributed as monthly checks that will start reaching households in July and last through the end of the year.
June 15, 2021
“There’s no discount for single parents at grocery stores, child care centers, or doctors’ offices.”
— Representative Katie Porter, Democrat of California
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One month from today, on July 15, a vast majority of Americans will start receiving the first in a series of payments to help them mitigate the costs of raising children.
The so-called child tax credits were expanded under President Biden’s $1.9 trillion American Rescue Plan that Congress passed in March, and will, for the first time, be distributed as monthly checks by the Internal Revenue Service, amounting to a kind of guaranteed income for roughly 39 million U.S. households.
“We are getting you a tax cut this year, now, when you need it,” Mr. Biden said last month in an address from the White House. “Help is here.”
Typically, the child tax credits are distributed annually, at the end of a financial year, either as a deduction to how much a family owes in taxes or, in some cases, as a lump sum check. Critically, those were only available to households with earned incomes.
“There’s always been conditionality built in — to get these tax refunds, you have to be working,” said Hilary Hoynes, a professor of economics and public policy at the University of California, Berkeley, whose research focuses on poverty, inequality and government safety nets. “The child tax credit is one of the largest anti-poverty programs in America for children but, by definition, it wasn’t reaching the very poorest families who don’t have earnings.”
In a significant reimagining of the tax credit, the administration expanded the size of the payments and extended them to include parents with little or no earnings, a move that researchers at Columbia University estimate could help cut child poverty in half.
By the end of the year, the monthly checks would total 50 percent of the annual tax credit a family would normally get, and the rest would then be paid when families file their taxes. Here’s how it all works.
Am I eligible?
It depends on how much you earn, and how old your children are. For the current tax year, families are set to receive a total of $3,600 for each child under the age of 6 or $3,000 for each child between 6 and 17 years old.
Starting in July, a chunk of that credit will be sent to taxpayers in installments of $250 or $300 each month through the end of the year.
The size of the payments reduces for higher income levels: Households earning more than $150,000 will receive up to $2,000 per child and households earning more than $400,000 will receive even less.
A household earning less than $150,000 with a child under the age of 6, for example, would receive checks of $300 a month until December, totaling $1,800. The remainder of the full credit — roughly $1,800 — will then be distributed when families file their taxes in 2022. If that household had two children under 6, they would get $600 per month.
I’m a single parent. How much will I get?
This is where things get a little complicated. For an unmarried parent filing as the head of household, the size of the credit reduces if they earn more than $112,500. So a single parent with a child under the age of 6 who earns $150,000 — as much as a married couple filing jointly — would get less of a tax credit.
Representative Katie Porter, Democrat of California and a single mother of three, is one of several outspoken voices who have repeatedly pointed out this wrinkle in the American Rescue Plan, and last month she introduced legislation — written with Representatives Ayanna Pressley and Don Beyer — to eliminate the different income levels for married or single parents.
“There’s no discount for single parents at grocery stores, child care centers, or doctors’ offices,” she noted in a statement. “Yet the child tax credit gives less help to single parent families.”
How do I sign up?
If you filed taxes last year, you don’t have to do anything. The money will be directly deposited to your bank account every month. Before the first check arrives, on July 15, the I.R.S. will also mail you a letter — Letter 6417 — to let you know how much you’ll be receiving every month.
If you didn’t file taxes last year, the I.R.S. has set up a new portal for you to sign up. Once you enter your details — like your mailing address, your bank account details and your social security number — the checks will be automatically sent to you. If you don’t have a bank account, you can still sign up using the portal and the checks will be mailed to you.
Can I spend the checks on anything I want?
Yes. Unlike some government programs, like food stamps, this one comes with no strings attached.
Households tend to use the end-of-year tax credits that are refunded in lump sums for large purchases they may have been putting off, like a new refrigerator or repairing the heating, said Ms. Hoynes, citing a handful of surveys. But with stable month-to-month checks, families may start budgeting for more ordinary expenditures, Ms. Hoynes added, like increasing the amount of groceries they purchase or buying new clothes for the coming school year.
On top of the monthly checks, the American Rescue Plan is also expanding a tax credit that will help households cover child or dependent care costs, including after school activities. For households earning less than $125,000, this credit could help cover up to 50 percent of care costs for a maximum amount of $8,000 per child or dependent person. This benefit, however, only applies to taxpayers who are working or looking for work and can only be claimed when families file their taxes in 2022. You would also need to detail your care providers’ information, like their address and tax identification number.
Why will the checks stop in December?
The American Rescue Plan only expanded the child tax credit for a year. But Democrats in Congress and the White House hope to make the expanded benefit more permanent under the president’s second infrastructure proposal, the American Families Plan, which has yet to make its way through Congress. In theory, expanding the size and scope of the child tax credit does have bipartisan support among voters and buy-in from some Senate Republicans, chief among them Senator Mitt Romney.