American families are set to receive a more generous child tax credit for 2021.
Starting in July, the IRS will begin sending out monthly payments of $250 or $300 through December to low- and moderate-income families who qualify, depending on the child’s age, the agency says.
The American Rescue Plan, which was passed in March, boosted the child tax credit, with the largest increases going to the lowest-income families with children.
President Joe Biden wants to extend the program through 2025 using another initiative dubbed the American Families Plan, which is part of his “Build Back Better” proposal.
What’s changed?
The American Rescue Plan included a temporary increase in the child tax credit for 2021 and is making advanced payments to qualifying families. Previously, the amount was $2,000, and families with little or no tax obligations weren’t eligible.
Under the latest legislation, the credit increases to $3,000 per child or $3,600 a child under 6. For the first time, it also allows 17-year-olds to qualify.
The credit is paid out in monthly installments. Struggling families could see monthly checks of $250 or $300 per child from July to December.
Who qualifies?
The IRS will use prior-year tax returns to determine who qualifies for the higher credit. If a return for 2020 hasn’t been filed yet, the agency will rely on 2019 returns.
The credit will begin to phase out for those making more than $75,000 a year or $150,000 for those married and filing jointly.
Families who aren’t eligible for the higher child credit could still be able to claim $2,000 credit per child.
The Biden administration wants to extend the program through 2025 via his American Families Plan.
