(CBS Philadelphia) – Raising children is expensive. From food to clothes to random trips to the emergency room, the costs add up quickly and unexpectedly. The updated Child Tax Credit , the Internal Revenue Service (IRS) will pay most parents up to $300 per month per child. (The actual amount depends on a few factors.) Think of it like a stimulus check for families. The money can be used for anything that a household needs to function.
How Much Money Will You Get?
The IRS will pay $3,600 per child, half as six monthly payments and half as a 2021 tax credit, to parents of children up to age five. That comes out to $300 per month through the end of 2021 and $1,800 at tax time next year. The amount changes to $3,000 total for each child ages six through 17, or $250 per month and $1,500 at tax time. The IRS will make a one-time payment of $500 for dependents age 18 or fulltime college students up through age 24.
As an example, suppose a payday loans Hawaii married couple has a four-year-old child and an eight-year-old child and showed an annual joint income of $120,000 on their 2020 taxes. The IRS would send them a monthly check for $550 starting in July. That’s $300 per month ($3,600 / 12) for the younger child and $250 per month ($3,000 / 12) for the older child. Those checks would last through December. The couple would then receive the $3,300 balance – $1,800 ($300 X 6) for the younger child and $1,500 ($250 X 6) for the older child – as part of their 2021 tax refund.
Parents of a child who ages out of an age bracket will be paid the lesser amount. That means if a five-year-old turns six in 2021, the parents will receive a total credit of $3,000 for the year, not $3,600. Likewise, if a 17-year-old turns 18 in 2021, the parents will receive $500, not $3,000.
The enhanced Child Tax Credit will be available to about 39 million families, accounting for 65 million children, according to the Biden administration. That covers around 88 percent of the nation’s youth.
Child Tax Credit Update: What You Need To Know
Advance Child Tax Credit payments will be based on the modified adjusted gross income (AGI) from a parent or parents’ 2020 tax filing. (AGI is the sum of one’s wages, interest, dividends, alimony, retirement distributions and other sources of income minus certain deductions, such as student loan interest, alimony payments and retirement contributions.) The amount phases out at a rate of $50 for every $1,000 of annual income beyond $75,000 for an individual and beyond $150,000 for a married couple. The benefit will be fully refundable. In other words, it will not depend on the recipient’s current tax burden. Qualifying families will receive the full amount, regardless of what they owe in taxes. There is no limit to the number of dependents that can be claimed.
“They have essentially opened it up to people who have zero taxable income, even non-filers,” according to Stephen Nunez, the Lead Researcher on Guaranteed Income at the Jain Family Institute, an applied research organization in the social sciences. (Nunez studies cash welfare policy, that includes field work to answer policy-relevant questions about the social safety net.) “And they have increased the value to $3,000 per child, if they’re over the age of six, and to $3,600 for children zero to five. So it represents a fairly significant increase in the generosity of the benefit, and one that researchers believe is likely to have a huge impact on child poverty. Some estimates suggest that this benefit alone can cut the child poverty rate by about 40%. And, of course, for middle class households, those who don’t fall under the federal poverty line, but who are still straining to make ends meet, this will represent some additional cash.”