7 Things You Didn’t Know About the Best New Tax Benefit for Families 

by Domenica Ghanem | July 12, 2021 10:21 pm

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Payments from the expanded child tax credit will start hitting bank accounts on July 15. Here’s everything you need to know.

As part of pandemic recovery efforts, the American Rescue Plan (ARP) includes a new expanded version of the child tax credit (CTC) to make more money available to more families. Starting on July 15, millions of families will see up to $300 per child every month in their bank accounts from now until the end of the year. And they’ll get additional benefits when they file their tax returns next year. Read on to find out if you’re eligible and how to get it.

What’s new about the CTC?

The credit used to be up to $2000 for families with kids ages 0-16 and around 27 million families  didn’t get the full amount. But this year, the Biden administration and Democrats in Congress expanded it so that families with kids ages 0-5 could get up to $3,600 for each child, and those with kids ages 6-17 could get up to $3,000 for each child. They also changed the rules so that all families making less than $112,500 for single parents, and $150,000 for married parents will get the full amount, not just higher income families. One other big change is that there is no work requirement for these benefits, so parents who stay home to care for their kids can get the credit, too. The credit phases out based on income, but single parent households making less than $200,000 and married households making less than $400,000 will still qualify for up to $2,000 per child. In summation, this expanded benefit helps everyone from no-income to middle class families which could not only cut child poverty in half, but give a real boost to our economy. You can visit Community Change’s CTC calculator to find out how much money your family could qualify for.

What are the qualifications?

To qualify for the CTC, you have to care for an eligible child up to age 17 AKA a dependent who has a social security number. A dependent can include your own child as well as stepchildren, siblings, half-siblings even nieces, nephews, and grandchildren can qualify as long as the child lives with you inside the United States for at least half of the year. Parents don’t need to have a social security number, but they’ll need at least an Individual Taxpayer Identification Number (ITIN) to claim the benefit for eligible children. Because of an anti-immigrant Trump-era policy that the ARP failed to address, if your child doesn’t have a social security number, they don’t qualify.

OK dope! How do I get it?

Many families don’t have to do a thing and will get the payments automatically if they filed taxes in 2019 or 2020, or if they signed up for the stimulus checks from the IRS last year. If you were supposed to file, but missed the tax deadline, it’s not too late! You can still file a return. Those who didn’t need to file can sign up for the CTC payments using a new tool on the IRS website (Pro tip: You can use this same tool to apply for any stimulus checks you may have missed). To make it easier, Community Change produced a video that walks you through the sign up process step-by-step (with screenshots!).

Will the money come all at once or monthly?

Another awesome thing about the new CTC is that you can opt to get up to half of your benefits in monthly payments that start right away. That means up to $300 each month for each child under the age of 6, and $250 a month for each child aged 6-17. And there are no requirements about how to spend the money. Backed up on your electric bills? Just got that school supplies list from your kid’s teacher? Those monthly installments can help you get what you need for your family now. If you prefer to get your CTC benefits in a lump sum when you file your taxes next year, you can opt out of advance payments on the IRS website using the CTC Update tool.

If I opt in to advance payments, does that mean I’ll have to pay it back?

Not unless your income and living arrangements change significantly from when you filed your 2019 or 2020 tax return. When you file your tax return for 2021, you can calculate the benefits you’re eligible for and compare them to the monthly payments you’ve already received. If the amount you got in advance is more than the amount you’re eligible for, it might reduce your refund or increase the amount you owe on your return. But the IRS has created some safe harbor protections for taxpayers.

Up to $2,000 per child is protected from this repayment if you claimed someone who it turns out was not eligible. Single parents making less than $40,000 and married parents making less than $60,000 qualify for the full protection, which phases out as people’s income rises.

If your circumstances have changed from when you filed your 2019 or 2020 return for example, if your child doesn’t live with you anymore you might need to repay the advance payments unless the child’s other parent or caregiver agrees to let you claim the credit or you disenroll using the update portal.

If your income has changed from when you filed your taxes, and you are concerned about it, you can let the IRS know by using the update portal later in the summer and it will change the estimate of your advance monthly payments.

If your situation is complicated and you have more questions, you can consult an accountant or attorney. The IRS is reopening free volunteer tax prep sites this summer to help people claim the credit.

Will the CTC payments affect my income threshold for other public benefits?

Nope! Child tax credit benefits are not considered to be income for any family. So they should not affect the calculation of your rent if you live in federal public housing, or count toward your income limit for Medicaid or any other federal benefit program.

How long will this expanded CTC last?

This expanded provision in the ARP ends after the 2021 tax year. But Community Change Action (CCA), dozens of grassroots organizations, and many Democrats are campaigning to make the new CTC permanent. CCA is also organizing to make the credit more inclusive to all immigrant families, regardless of their status or whether they have a social security number. If you’re interested in getting involved in the action, you can check out upcoming events and resources at www.communitychangeaction.org/taxcredits

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