Many parents will receive an extra boost in their bank account this month — and every month through December.
This Thursday, eligible Americans will receive their first monthly payment of the child tax credit expansion as part of the American Rescue Plan signed into law by President Joe Biden during the pandemic.
According to national media reports, the IRS has begun sending out letters informing 36 million families who are eligible, based on their tax returns. There are roughly 39 million households who will receive the payments automatically.
Families of more than 65 million children will receive monthly payments of up to $300 a month for each child under age 6 and $250 for each child ages 6 to 17 years, via direct deposit, checks or debit cards in the mail.
Each payment will be delivered on the 15th of the month, with the exceptions of holidays or weekends, through December.
Locally, more than 135,000 children on the Central Coast will benefit from the enhanced child tax credit, according to U.S. Rep. Salud Carbajal, D-Santa Barbara.
He told the News-Press Monday that this increased credit is “a historic investment in the future of our country that will lift many children and families out of poverty.”
These payments will be based on taxpayers’ 2020 tax returns. If those are not filed or processed yet, it will be based on their 2019 returns.
To reach the low-income households who don’t typically file tax returns, a portal will be set up so families can submit their information and claim both the enhanced child tax credit and any stimulus checks they missed.
This Non-Filers tool was on irs.gov last year for those who needed to register for stimulus payments who do not normally file taxes. National media reports said the tool was used by more than 8 million people. Users answer questions about their households and provide their bank account information to receive the funds directly.
In addition, a separate portal will be available for parents to update their bank address, account information and family size. They could also opt out of the monthly payments to receive the tax credit as a lump sum next year when they file.
In total, eligible families can receive a credit totaling $3,600 for each child under 6 and $3,000 for each child under age 18 for 2021. Single parents with annual incomes up to $75,000, heads of households earning $112,500 and joint filers making up to $150,000 a year will be eligible for the enhanced credit.
“I come from a working class family, so I know that $300 a month can make a real difference in people’s lives,” Rep. Carbajal said. “It has become harder and harder to afford housing or child care and, as the cost of living soars and wages stay the same, we need to level the playing field so every child has the opportunity to fulfill their potential.”
The Biden administration, the IRS and other national community organizations are conducting outreach to inform very low-income families of their options, as they had not qualified for all or most of the credit in the past.
The new law boosts the child tax credit to $2,000 per child under age 17.
The tax credit is also fully refundable, so more low-income parents can take advantage of it. More than 20 million children have been unable to get full credit because their families’ incomes are too low.
The child tax credit alone is expected to cut child poverty in half, according to estimates from both Columbia University and the Urban Institute, and lift more than 5 million children out of poverty this year.
Talks of making this boost permanent are being pushed by Democratic lawmakers. However, President Biden is only proposing to continue the increased payments through 2025 through his American Families Plan, costing roughly $110 billion a year.
“The expansion of the child tax credit means working, middle class families will get $300 per child under 6 to help put food on the table, cover health expenses or pay for child care,” Rep. Carbajal said. “That means healthier kids, and it means parents can get back to work and continue to provide for their families.”