When Congress passed the American Rescue Plan in early March, the $1.9 trillion package mandated $1,400 checks for most Americans, while also expanding unemployment benefits and appropriating funds for coronavirus relief and vaccine distribution.
The new law also included a change in how the child tax credit works. Families will now receive as much as $3,600 per child.
Kiplinger has an explainer of how the child tax credit works, as well as a calculator.
The new law, per the site, “temporarily increases the child tax credit from $2,000 to $3,000 per child ($3,600 for children five years old and younger) for the 2021 tax year. It also authorizes periodic ‘child allowance’ payments to families from July to December. Half the total credit amount will be paid in advance with the periodic payments, while the other half will be claimed on the tax return that you'll file next year.”
The credit also phases out for families above a certain income level.
The Kiplinger calculator asks how families filed their taxes, how many children they have, how old their children are, and what their adjusted gross income (AGI) was in 2020 (or 2019, if they haven’t filed for 2020 yet.)
Kiplinger also listed the change for 2021.
“Under the American Rescue Plan, the 2021 increase (i.e., the extra $1,000 or $1,600) is gradually phased-out for joint filers with an AGI of $150,000 or more, head-of-household filers with an AGI of $112,500 or more, and all other taxpayers with an AGI of $75,000 or more. However, the increase can’t be reduced below zero (other limitations to this reduction will apply as well).”
CNET explained why the child tax credit will be split between 2021 and 2022.
“The first thing to know is you won’t get your CTC payments all at once this year,” the site said. “As with your taxes, the child tax credit in the stimulus bill is for 2021. The ‘credit’ part means the amount you owe in your taxes will be reduced by the ‘credit’ you gain from your eligible dependents. That could either reduce your payment to the IRS for your 2021 taxes (filed in 2022) or else increase your tax refund for 2021. Normally, you'd receive that ‘credit’ as a tax refund in 2022. But the plan is to bring you money sooner, which is why the checks will start coming in 2021 as ‘advance payments.’”
The change to the child tax credit followed a proposal by Sen. Mitt Romney (R-Utah), who had in February proposed a new plan to enact a child allowance, as explained at the time by Vox. Romney, however, voted against the final bill.
Stephen Silver, a technology writer for the National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.