In March 2021, the American Rescue Plan passed and ushered in a historic one-year expansion of the Child Tax Credit (CTC) that has the power to significantly boost income security, reduce child poverty, advance racial equity, and create a public investment for the good of all children. This temporary expansion is not perfect and, critically, is not permanent—we are fighting hard to ensure that we make the most of this momentum and pass a permanent and inclusive universal child allowance, which would be life-changing for families across the country.
In the meantime, we have outlined what you need to know about the CTC expansion and what it means for your family.
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Child Tax Credit: Frequently Asked Questions
Q: What is the Child Tax Credit?
A: The Child Tax Credit (CTC) is a decades-old support for families to help them afford the everyday expenses of raising children. It has historically been claimed at the time that a parent or caregiver files their taxes, and it has also been seriously flawed: millions of families did not previously qualify for the CTC because, ironically, they earned too little. The American Rescue Plan, signed into law on March 11, 2021, expands and improves upon the CTC for one year, making it available to the 23 million children—disproportionately Black and Latinx children—who were previously left out.
The American Rescue Plan also changed the way that the benefit will be available to families this year: instead of having to wait until they file their taxes in 2022, families will be able to get a cash benefit “advance” on the credit through monthly payments beginning July 15, 2021.
The expanded Child Tax Credit is a down-payment on ending child poverty and must be made permanent, and the Children’s Defense Fund is fighting hard to make that happen.
Q: How does the expanded CTC advance racial equity and reduce child poverty?
A: If implemented well, the American Rescue Plan is projected to cut child poverty in half in 2021, and the one-year expansion of the CTC accounts for the vast majority of the poverty-fighting effect of the bill. Its impact on racial disparities in poverty is even more dramatic: if implemented well, this change may cut poverty by 52 percent for Black children, by 45 percent for Hispanic children, by 37 percent for Asian American and Pacific Islander (AAPI) children, and by 62 percent for Indigenous children.
Q: What is the difference between the Child Tax Credit and a child allowance?
A: The inclusion of this robust expansion of the CTC in the American Rescue Plan is a critical step forward in making a guaranteed monthly child allowance permanent. A child allowance is a regular, direct, per-child payment that helps families afford the costs of raising children. A child allowance is available to all children, is easy to access, and is unconditional. In turn, it helps boost children’s health, increase family income, and reduce racial disparities. In order to truly create a universal child allowance, the expansion of the CTC would need to be improved upon so that it reaches all children and is permanent. The Children’s Defense Fund and our partners in the Automatic Benefit for Children (ABC) Coalition are fighting to make a permanent child allowance a reality.
Q: Who is eligible for the Child Tax Credit?
A: Families in the U.S. and territories qualify for the newly expanded CTC. Married couples filing jointly making up to $150,000, single head of households making up to $112,500, and other single filers making up to $75,000 will receive the monthly payment of the CTC from July 15 to December 2021. In a very positive change from the current law, the expansion of the Child Tax Credit in the American Rescue Plan means that you do not have to be employed to receive the benefit; even families who have no income at all are eligible.
Q: How much of a cash benefit will I receive?
A: The simple answer is that it depends on your income, how many children you have, and their ages.
If you are unmarried and earn less than $112,500 per year or are married and your household income is less than $150,000 per year, you will receive $3,600 per child under six years old and $3,000 per child age six to 17. Eligible families will receive up to $300 per month for each child under six, and $250 per month for each child between ages six and 17.
So, for example, if you have one child, aged seven, you will receive $3,000 over the course of a year, or $250 per month.
The cash benefit begins to reduce by $50 for every additional $1,000 of income earned. Higher-income families who previously qualified are still eligible for the $2,000 per child benefit for individuals making up to $200,000 and joint filers making up to $400,000. Meaning, they will not receive less than what they previously did under current law.
The IRS is creating interactive online tools to help families determine their eligibility for the advanced CTC and to update their information (known as the CTC Update Portal), including bank accounts, changes in the number of children, filing status and more. Please check this website where the IRS will update information as soon as it becomes available.
Q: How do I apply for the Child Tax Credit?
A: Most families will receive the payment automatically starting July 15. That’s because families that filed federal income taxes in 2019 or 2020 will not need to take any additional steps to apply for the benefit as the IRS will calculate payment amount based on either tax returns. Families who used the non-filer online portal last year to receive their stimulus payment will also automatically receive the CTC. Families who haven’t filed taxes recently will have to either file their taxes as soon as possible to receive the payments or use the IRS simplified filing tool once it becomes available in late June.
Q: If I am eligible for the Child Tax Credit, when will I see my monthly payments?
A: According to the IRS, the first monthly payment will go to families on July 15—families of at least 88 percent of children (65 million children in total) will receive payments automatically—automatically. The payments will be made on the 15th of each month and households will receive the payments through direct deposit, paper check, or debit cards.
The IRS is also creating an option for families to “opt-out” of the monthly payments, if they would prefer to have the cash benefit in one lump sum during tax time.
Families opting to receive the monthly payments will receive the other half of the credit when you file your tax return in 2022.
Q: How will the IRS get me my benefit?
A: If the IRS already has your bank account information on file, you will receive the CTC advanced monthly payments through direct deposit, as you would receive a tax refund or have received recent economic stimulus payments. For those who have new bank accounts or do not have a bank account on file with the IRS, you will be able to use the “CTC Update Portal” that the IRS is creating this summer. If you do not have a bank account, paper checks will be sent to your address.
Q: Will I continue to get this cash benefit every year?
A: Not currently. This is a temporary expansion of the CTC that applies only for tax year 2021. The Children’s Defense Fund is fighting hard to ensure that Congress takes additional action and passes legislation that includes a permanent expansion and other critical improvements to the CTC.
Looking for more information?
Check out our “Understanding the Expanded Child Tax Credit” blog post for the answers to additional questions you may have and our “File Your 2020 Taxes” resource for more information about filing your taxes to get the money you and your family are owed.
What will this advanced monthly or periodic payment mean for your family?
We want to hear from you! Please fill out this brief survey to tell us how the expansion of the Child Tax Credit will make a difference for your family this year:
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