The enhanced child tax credit is a part of President Biden’s American Rescue Plan that’s designed to increase the existing child tax credit for kids up to the age of 17. If you want to know more about it, what it means for you, and how you can qualify, here are six important things to know!
1. Who qualifies?
Nearly 90% of households with children in the United States qualify for the enhanced child tax credit under the American Rescue Plan. The deciding factor in whether or not you qualify is your income. Individual taxpayers must have an adjusted gross income of less than $75,000, while heads of households must make less than $112,500. For married couples who file jointly, you must make less than $150,000 to qualify for the enhanced child tax credit.
2. How much are payments?
Payment amounts depend on the age of your child. For children who are younger than 6 years old on December 31, 2021, the payment amount is $300 per month. For children over the age of 6, the payment amount is $250 per month. The higher payment amount for younger children is designed to compensate for the fact that young children need diapers, baby formula, and more frequent doctor visits.
3. When will payments be made?
If you qualify, you can expect to receive your first payment on the 15th of July. This will be one monthly payment for the amount you’re owed, which depends on how many children you have and how old they are. After the initial payment, you can expect to receive monthly child tax credit payments on the 15th of each month, provided the 15th isn’t a weekend or holiday.
4. Will payments from January through June be made?
With payments starting in July, you may be wondering what happens to the monthly payments from January through June. While you will have to wait a while, these payments will eventually be made. You will receive payments for January through June when you file your 2022 tax return. These payments are designed to help with monthly bills, food, kid’s’ clothes, and other expenses such as necessary home renovations.
5. How long will the child tax credit last?
As of right now, the enhanced child tax credit is only designed to last until the end of 2021. However, President Biden is attempting to extend it by four years with his American Families Plan. While this extension is far from a guarantee, there’s a chance that it could be extended until at least 2025.
6. What do I need to do to receive payment?
One of the best parts about the enhanced child tax credit is the fact that most families don’t have to do anything to receive payment. As long as you filed a tax return in 2020, you can expect to receive your monthly payments throughout 2021. However, that’s not the case for non-filers. If you haven’t filed your 2020 taxes, it’s important to do that now so you can receive it through 2021. All you have to do is fill out a 1040 and submit it to the IRS.
As a parent, it can be difficult to make ends meet. Things were made even more difficult during the COVID-19 pandemic, with children unable to attend school in person and many parents losing their job. If you have children, make sure you file your 2020 taxes so that you qualify for the enhanced child tax credit.