The New Monthly Child Tax Credits Start July 15th: An Expert Explains How It Works
The child tax credit, part of the American Rescue Plan signed by President Biden this past March, starts on July 15. This will be a huge relief for many families, but many parents have a few questions, such as how it is different from the child tax c added when doing yearly taxes and who qualifies. We connected with Radha Seshagiri, director of public policy and systems change, at SaverLife (a nonprofit on a mission — to inspire, inform, and reward the millions of Americans who need help saving money) to share on how this Child Tax credit works.
Also, if you do not usually file a tax return, you can visit the online tool IRS recently unveiled to help low-income families register for monthly Child Tax Credit payments.
Psst…check out our Summer Reading List for Kids of All Ages 2021.
What is a tax credit, and how does it work?
A child tax credit is a benefit to help families who are raising children. It helps offset the costs of raising kids.
A refundable tax credit is one in which you receive more than you owe in taxes. For example: if you owe $3,000 in taxes and have credits totaling $4,000, the government owes YOU $1,000.
What is the Biden Child Tax Credit, and how is it different from the $3,000 Child Tax Credit (CTC)?
The Child Tax Credit has been around since 1997, but, like the Earned Income Tax Credit (EITC), it used to be distributed in a lump sum at the same time as other tax refunds.
The American Rescue Plan, signed into law on March 11th, 2021, under the Biden administration, includes an expansion of the Child Tax Credit.
To get money to families sooner, the IRS will send you half of your 2021 Child Tax Credit this year, automatically, starting in July. It will be broken up into monthly payments, which means payments of up to $300 per child under age 6 and $250 per child ages 6 to 17.
You’ll get the remainder of the credit when you file your taxes in 2022.
This is a temporary one-year expansion of the CTC for your 2021 tax return (which you file in 2022).
Who qualifies for the Biden Tax Credit and when will it start, and how long will it run?
Here’s who’s eligible:
● Any individual who earns under $75K
● A head of household who earns under $112,500
● A couple that earns under $150K and has dependent children
There is no minimum income requirement. Children claimed for the CTC must have a valid Social Security number (SSN).
It is important to dispel some myths about people who are qualified. Many people believe that because they don’t make enough to file taxes, they don’t qualify. This is not true. If you don’t typically have to file tax returns, you HAVE to take some form of action with the IRS. The White House website has a great FAQ on the credit and eligibility: ChildTaxCredit.gov.
Are there other tax credits that can help families, especially families at the poverty level?
People can qualify for credits for several reasons. The Earned Income Tax Credit (EITC), for example, is a significant credit for lower-income workers between the ages of 25-64, especially those with children. The Savers Tax Credit is a credit that lower-income workers may receive for contributing to a qualified retirement plan. The Child and Dependent Care Tax Credit helps families with children offset the cost of care. There are several more available through the IRS.
This story first appeared on NewYorkFamily.com.
