On Thursday up to 39 million US households will receive their first instalment of the expanded Child Tax Credit.
The White House believes that the new credit will cover almost 90 per cent of the children in the US.
Brought in by Joe Biden’s administration in March as part of the American Rescue Plan to help the country recover from the economic impact of the coronavirus pandemic, it is hoped that it will help lift millions of children out of poverty.
The credit is paid half in direct payments, with the remaining balance claimed on 2021 tax returns.
It was increased from $2,000 to $3,600 per child under the age of six, with children aged six to 17 eligible for $3,000 per child.
From 15 July onwards payments will be made of $250 or $300 on the 15th of each month unless that date falls on a holiday or weekend.
Parents also have the option of un-enrolling in the monthly payments and claiming the full benefit in 2022.
To qualify for the full payments, a single parent must report an annual income of less than $112,500. Couples who file taxes jointly have an income limit of $150,000 to qualify for the maximum amount.
Those with incomes above those limits will have the credit reduced to $2,000 per child for a reported income up to $200,000.
The credit will be below $2,000 for those joint-filers with a combined income of $400,000, dropping by $50 for each $1,000 over that threshold.
These thresholds and payments are based on the parent or parents’ most recent tax return and adjusted gross income — total income minus eligible deductions, also available on form 1040 of the most recent return.
Several tax accountants and other financial services firms have calculators available on their websites, including H&R Block, Bankrate, and Kilpinger, or the IRS.
Currently, the credit is only available in 2021, but the White House has proposed extending it for several more years.
For this to happen, Congress would need to pass the American Families Plan, which also includes universal preschool, free community college, and paid family leave.
