How much money has the Child Tax Credit given families in 2021?
An innovative feature of the 2021 Child Tax Credit is the advance payments scheme. American families will receive the fourth installment is on 15 October.
In July the IRS took on a new mission, to send around 35 million families monthly advance payments on the enhanced Child Tax Credit. Families have now received half of the payments for 2021 but that only represent one quarter of the credit they could be eligible for.
The six advance installments on what is a tax rebate for the 2021 fiscal year represent only half the total Child Tax Credit that families could be eligible to receive. So how much have families received and what can the look forward to receiving?
Child Tax Credit revamped for 2021 fiscal year
The Child Tax Credit, which has been around since the 1990s, was revamped under the American Rescue Plan that the Democrats pushed through Congress in March. The sweeping legislation gave the IRS a lot of additional work in the middle of the tax filing season, from stimulus checks to adjusting tax returns already filed by those who claimed unemployment benefits in 2020 and more. In order to give the IRS time to set up the payment program, the first payments were scheduled to go out 15 July.
The changes, although implemented just for the 2021 fiscal, were intended to be made permanent by its advocates. The idea was that in a later bill, which Democrats are currently hashing out on Capitol Hill, would extend the changes, if not permanently at least into the near future. President Biden called for the program to be extended until 2025, the same year that the changes made to credit in 2017 expire. Those changes doubled the amount parents could claim from $1,000 to $2,000.
The 2017 Tax Cuts and Jobs Act also made $1,400 of the Child Tax Credit refundable, which meant families could claim those funds even if they paid less in taxes. The changes in 2021 increased the credit to $3,600 per child under six and $3,000 for each child six to 17. Furthermore, the whole amount was made refundable, and the earnings floor was removed allowing taxpayers with no income to claim the credit.
Are you a taxpayer? Do you have kids under 18? Then you are probably about to get a tax cut -- deposited directly into your bank account, each month, starting July 15 -- thanks to the American Rescue Plan.— Ronald Klain (@WHCOS) May 18, 2021
How much? This tool will let you know.https://t.co/cklq1RTbZ3
How much have families received from the Child Tax Credit in 2021?
So far, a family that meets the requirements to receive the full credit has received between $750 and $900 per child with a similar amount yet to come split equally among the three remaining instalments. Taxpayers will be able to claim the remaining $1,500 or $1,800 per child when they file their taxes for 2021.
That is unless their financial situation has changed making them eligible for less of the credit than they were originally deemed eligible for. Any overpayments this year would be removed from the potential tax refund they would receive next year.
‘Direct cash payments were the single most useful tool for helping people ride out the pandemic.’—Researchers said their findings counter a narrative that stimulus payments and unemployment benefits were 'too generous' and disincentivized work. https://t.co/FHdQ81UXUh— City Limits (@CityLimitsNews) October 6, 2021
Monthly installments provide boost to household finances
Providing financial stability to American families was the impetus behind sending families the money upfront and not making them wait until they file their tax returns to get the credit as a lump sum tax refund. It is also seen as a way of combating childhood poverty which the program was predicted could cut by half according to estimates by the Center on Poverty and Social Policy at Columbia University.
A study on the impact of the first payment showed promise for the enhanced tax provision with 3 million less children living in poverty. However, the poverty reduction wasn’t as high as predicted due to some eligible families not receiving the credit. The US Census Bureau data from after the first payment backed up the findings of the study showing a drop in food insecurity and difficulty paying bills.
The Child Tax Credit continues to deliver in August:— Center on Poverty & Social Policy (CPSP) (@CpspPoverty) September 29, 2021
⬆️ 3.5 million children kept out of poverty
⬆️ 500,000 more children kept out of poverty in August than July
⬇️ Monthly poverty rate continues to fall
Learn more: https://t.co/9yN6VeHus9 pic.twitter.com/LFRXjXy9hz
What does the future hold for the changes to the Child Tax Cut?
Democrats in Congress are working on extending the enhancements to the Child Tax Credit through legislation for President Biden’s Build Back Better plan. A rump portion of the roads and bridges infrastructure proposals in the plan passed the Senate in August with bipartisan support. That bit is awaiting a vote in the House, but progressives in the party are standing firm holding back their votes until the remainder of the President’s vision is also passed in the Senate.
Negotiations have been dragging on over the price of the Build Back Better bill. Progressives had originally pushed for $6 trillion in spending but settled for $3.5 trillion over the next ten years. However, two centrist senators, Joe Manchin and Kyrsten Sinema have said they won’t vote for a bill that size and would like to see a smaller bill. They have come under heavy criticism from their colleagues in Congress for not stating what they want to reduce, leaving it up to their colleagues to negotiate against themselves as Chair of the Progressive Caucus Representative Pramila Jayapal said in an interview.
#IRSTaxTip: Non-traditional families may qualify for advance #ChildTaxCredit payments. Check out the #IRS eligibility guidelines and see if your family qualifies: https://t.co/9J5HB58rqX— IRSnews (@IRSnews) October 13, 2021
*Thanks for sharing your artwork, Kayleigh* pic.twitter.com/QklAjdqPjp
Child Tax Credit extension at risk of being cut from Democrats’ spending bill
Senator Joe Manchin has started saying some of the things he would like to see go from his party’s spending bill. He also said his colleagues could keep one of four family-focused proposals in the proposal. The Child Tax Credit was one of them. Although he says he likes the tax provision he would like to see it means tested to bring down the cost and have a work requirement in order to claim it.
The Center on Poverty and Social Policy at Columbia University in an August study found that the benefits outweighed the cost of the program. They calculate that the converting the program into a child allowance would cost taxpayers about $100 billion per year but that $84 billion of that would be recouped. Furthermore, the program would generate roughly $800 billion in “current and future benefits for society.”
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