When many families look at their bank accounts Thursday, they might notice some extra money. That’s because that’s when the first of six monthly federal payments is expected to land. Families will receive the money as part of the expanded Child Tax Credit. Here’s a quick Q&A on what the credit is, who qualifies, how much money people will get and what else you need to know.
Child tax credit ‘huge benefit’ for struggling Black families in Memphis
Read more here.
What is the Child Tax Credit?
The federal child tax credit has been around since 1997 and has gone through various changes. In recent years, it was a partially refundable credit, which meant if a person made enough money to pay taxes, they’d get some of those taxes reimbursed as a credit. People who didn’t make enough to get a tax refund could not get the full credit.
This year, Congress passed President Joe Biden’s COVID-19 relief package called the American Rescue Plan, which temporarily made substantial changes to the credit. Now, the credit is unrelated to whether or not someone pays taxes, meaning every person below a high-income threshold and who claims a child up to age 17 for taxes is theoretically eligible for the full payment. Congress also increased the maximum amount families received by at least $1,000 per child and changed the default payments to installments instead of a lump sum on tax returns.
When do the payments begin and how will families receive the money?
Between July 15 and Dec. 31, families will get a monthly payment either mailed by check or, if the IRS has up-to-date bank information, deposited directly in an account. After the end of the year, the remaining portion of the 2021 tax credit will be distributed in a lump sum with tax refunds. The credit is a temporary, one-year change for now, though Congressional Democrats have said they want to make the changes permanent.
The IRS has sent letters letting families know the money should be coming, but people who don’t file taxes will need to use the IRS’ Non-filer Sign-up Tool to file simplified tax returns. If families haven’t yet done so, that’s OK. People can update their information online anytime.
Who gets the money and how much will they get?
Anyone with a child will receive $300 a month for each child under 6 years old, and $250 per child between 6 and 17 years old, up to a high-income threshold (the previous age limit was 16 years old). If the child’s parents file separate returns (for example, if they’re not married), only one parent can claim the child as a dependent and get the credit.
The payment amounts begin to decrease after $75,000 in income for single filers, $112,500 for head of household filers, and $150,000 for joint filers. Still, families will not receive less than they did before the change to the tax credit.
Parents will be able to change the number of children they are claiming or update their income by using the Child Tax Credit Update Portal, which will be available by late summer, the IRS says.
Who will not get money?
People who make more than $240,000 for single tax filers and $440,000 for joint filers will not get a refund.
Undocumented people may qualify for the tax credits if they have an Individual Tax Identification Number and their children have social security numbers.
This story is brought to you by MLK50: Justice Through Journalism, a nonprofit newsroom focused on poverty, power and policy in Memphis. Support independent journalism by making a tax-deductible donation today. MLK50 is also supported by these generous donors.