Child tax credit: Parents will soon get a monthly check
Published 11:38 am Friday, May 21, 2021
Good news for parents: Hundreds of dollars per month will go to millions of American families starting in July.
The Biden administration will begin paying hundreds of dollars per month to millions of American families in July as it rolls out a refundable child tax credit that was created as part of the economic relief legislation Congress passed in March.
The credit will go to roughly 39 million households with about 65 million children, or 88 percent of the children in the U.S., according to the IRS.
The Treasury Department said this week that the temporary payments of up to $300 per month would begin on July 15. Families with children under 6 years old can receive the full payments, while those with children over 6 can receive up to $250 per month.
The size of the payments will be reduced based on income levels.
The money is an advance on expanded refunds that taxpayers are eligible to receive under the American Rescue Plan. Families are getting half of the money as monthly payments this year and will get the rest when they file their tax returns next year. The law increased the maximum size of the tax credit to $3,600 this year.
As with the economic stimulus payments, the child tax credit money will be distributed by the Internal Revenue Service through direct deposit, checks or debit cards.
The IRS said that future payments will be made on the 15th of each month, unless the 15th falls on a weekend or holiday, at which point the money will be sent on the closest business day. Families can plan their budgets around receiving the payment mid-month, the IRS said.
The child tax credit has its pros and cons. The main argument in favor of child allowances is that the family is under serious economic stress. Though a refundable credit may have some workforce participation among the poor, the effect is likely to be small, while the overall help to struggling families will be greater. And, in some cases, enabling a parent to stay home with a young child is not an unwelcome outcome.
Then, there are those who think the refundable child credit, which has no work requirements, will encourage dependence and sloth, provide incentives for out-of-wedlock births and irresponsible behavior.
The child tax credit represents big changes to the way that the tax credit is structured. It is much more generous, fully refundable, no longer has any work requirements and the fact it is being paid out on a monthly basis are big pluses for the program.
Yes, it will cost more, and no doubt, many will take advantage of it by not working and using it for purposes that are not positive.
But, for many families it is a welcome move.
The child tax credit in the stimulus package is just a temporary measure, however, many in Congress would like to make it permanent. So far, the monthly payments are only scheduled to continue through the end of 2021. Families will receive the second half of the credit when they file their 2021 taxes in 2022. But that could change — President Biden has suggested making the enhanced credit available through 2025, and some in Congress want to make it a permanent benefit. We will see it if this comes about.