American Rescue Plan Child Tax Credits: What to expect
The last 18 months have brought about a lot of financial changes, and almost as many financial aid programs as a result. Keeping up with them may seem overwhelming, but we have you covered. Keep reading below to learn more about the American Rescue Plan Child Tax Credit and what it means for you:
What is the American Rescue Plan?
Much like the stimulus funds that most Americans received over the last two years, the American Rescue Plan is a similar process of getting funds to people to aid in times of financial crisis. You can find all the details you want (and more!) at the Treasury website, which outlines answers to many frequently asked questions.
How much do I get?
It’s okay—you can ask! The American Rescue Plan clearly outlines the amount that will be distributed: up to $1,400 for individuals, $2,800 for couples, and an additional $1,400 for each dependent in the household. Unlike the previous stimulus payments, dependents are defined as anyone you claimed as a dependent on your tax returns, not just children 17 and under.
There is another change to this plan that distinguishes it from previous stimulus packages: the expansion of the Child Tax Credit. While this credit was not created for the American Rescue Plan, it was expanded under the plan. Now, the credit has been raised to $3,600 for children under age 6, and to $3,000 for children under the age of 18.
When will I get the money?
The IRS announced that they will begin sending monthly payments to disperse the funds beginning July 1, 2021, and lasting until December 31 of 2021. The IRS is creating an online portal to allow eligible people to make any necessary changes or updates, like adding a child who was recently born so the IRS knows to adjust their credit amount accordingly.
This credit is best thought of as an advance of sorts, because the 2021 tax filing season on which the credit is based will not occur until 2022. However, payments will continue from January through June of 2022 to ensure families receive a year’s worth of funds.
This amount will vary for each family—the monthly payments are meant to disburse the funds based on how much each child is eligible to receive. For instance, the benefit could be worth up to $300 per child per month if each child is under the age of six as of December 31, 2021. Again, each family’s amount will be different, but you can figure out your monthly payment based on the ages and number of your qualifying children.
How do I know if I’m eligible?
You probably are—an estimated 90% of Americans are eligible for the updated Child Tax Credit benefits. If you meet the following qualifications, you can receive the credit:
- An adjusted gross income of $75,000 for individual taxpayers
- An adjusted gross income of $112,500 for heads of household
- An adjusted gross income of $150,000 for married taxpayers filing jointly, and widows/widowers
While no one is sure yet if the credit will be extended beyond its initial run, some have proposed that the credits continue until 2025, but nothing has been finalized in this regard. The IRS has stated that they plan to create a public campaign that will ensure that everyone understands any updates as they become available.
Do I have to pay back the money?
Like the previous stimulus funds, you will not have to pay back any money—unless your information is out of date. For instance, if you a child who aged out of the eligibility last year but have not filed your 2020 taxes to reflect that, you may be overpaid by the IRS, and you would be expected to repay the excess amount next year. Be sure to keep your tax returns updated with the latest information to avoid any confusion or overpayments.
No one could have predicted the events of the last couple of years, but it’s safe to say that there are some solutions to struggles on the horizon. If you’re still not sure whether you qualify for the Child Tax Credit or what it means for your family, we’re always here to help. Reach out with your questions and learn what this credit means for you.