The American Rescue Plan provides expanded benefits for families with children under the age of 18. Juanmonino/Getty Images

Here’s who will benefit from the expanded child tax credit

Janet Nguyen May 18, 2021
The American Rescue Plan provides expanded benefits for families with children under the age of 18. Juanmonino/Getty Images

Millions of families will receive monthly payments as part of the American Rescue Plan’s expanded child tax credit, the first time the government has provided such a benefit.

The payments will offset the costs of raising a child, an issue that’s been exacerbated by the pandemic. The COVID-19 crisis led to massive job losses, disproportionately affecting women — especially mothers with young kids, according to a report from the Brookings Institution.

Under previous rules, the child tax credit provided the full credit when families filed their taxes, and they had to make at least $2,500 in income. 

Eligible families, which number about 39 million, will receive their first monthly payment on July 15. The benefit is worth up to $300 per month for each child under age 6 and up to $250 for each child between the ages of 6 and 17, equating to an annual maximum of $3,600 for the younger children and $3,000 for the older ones. 

The government plans to transmit the payments through direct deposit, paper check or debit card, with no action required by the recipients. Benefits will phase out for single filers whose adjusted gross income exceeds $75,000 for the 2021 tax year and for married couples filing jointly who make more than $150,000.  

“I don’t think any of us thought there would be this kind of ambitious, expanded child tax credit going out to families,” said Lisa A. Gennetian, a professor of early learning policy studies at Duke University.

Gennetian called the plan ambitious because it increases income for families without a work requirement, expands a refund to families who might otherwise not have a tax liability and provides an allowance to each child under the age of 18 — on a monthly basis.

But one big question she has is whether the credit will become permanent. President Joe Biden has proposed extending it through 2025. 

Katherine Michelmore, an assistant professor of public administration and international affairs at Syracuse University, said the extra $3,000 is a substantial amount for lower-income Americans who may not have received the child tax credit in previous years. 

According to the IRS, overall the American Rescue Plan is likely to raise 5 million children out of poverty this year, cutting child poverty by more than half. 

But while Michelmore said this would be a significant accomplishment, there may be some “hiccups” in the rollout of the tax credit. 

“The IRS is not in the business of sending out monthly checks,” she said.

She noted that you get this benefit when you file your taxes, which could leave out people who aren’t accustomed to filing because their incomes aren’t high enough. Michelmore said that 20% of those eligible don’t claim the earned income tax credit, largely because they don’t file their taxes. 

Another complication, she said, is that children don’t always stay in the same household. 

“If parents are sharing custody and kids are jumping around to different households, figuring out who’s really eligible, I think, is something that’s going to be challenging.”

Gennetian echoed Michelmore’s concerns, saying not everyone who’s eligible is familiar with the tax system.

But despite these potential issues, Gennetian said, “for those of us who really think hard about protecting children’s development, this is superexciting.”

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