The Internal Revenue Service and Treasury Department on Wednesday sent roughly 35.2 million American families, worth $15 billion, the first enhanced child tax credit payment from the Democrats’ coronavirus relief package.
The average payment for the first round is $423 and will reach nearly 60 million eligible children, the agency said.
“For the first time in our nation’s history, American working families are receiving monthly tax relief payments to help pay for essentials like doctor’s visits, school supplies, and groceries,” Treasury Secretary Janet Yellen said in a statement. “This major middle-class tax relief and step in reducing child poverty is a remarkable economic victory for America—and also a moral one.”
The expanded child tax credit is one of the largest anti-poverty spending initiatives and will help lift over five million children out of poverty this year, according to the department, reducing child poverty by more than half.
“It is a huge deal,” Arohi Pathak, director of policy at the Poverty to Prosperity program at the Center for American Progress, told CNBC. ”[The child tax credit] is a huge relief for way too many working parents and particularly during this pandemic.”
President Joe Biden’s American Rescue Plan boosted the child tax credit from $2,000 to $3,000 for each child between the ages of six to 17 and allowed eligible families to receive as much as $3,600 for each child under the age of six.
The IRS will send the enhanced credit on a monthly basis from July through December largely by direct deposit, while the rest of the credit can be claimed when parents file taxes next year.
Parents with children under the age of six will get $300 monthly payments per child starting July 15, and those with children between the ages of six and 17 will receive $250 payments per child.
To qualify for the full tax credit, individuals must earn less than $75,000, joint filers must make less than $150,000 and heads of households must earn less than $112,500. The amount will then drop by $50 for each $1,000 in income above these caps.
Families also have the option to receive the money in a lump sum next year rather than in the form of monthly payments. Roughly one million households have done this, according to the IRS.
Millions of low-income families also qualify for the credit since the relief package made it fully refundable. In the past, the credit was only partially refundable, making many low-income families unable to receive the money. This will reach nearly 27 million children, which represents almost half of the Black and Latino children who have not received the credit previously, the Center on Budget and Policy Priorities reported.
The IRS also noted that the changed child tax credit rules will reach almost 90 percent of children.
It will also help eliminate 4.1 million out of poverty, including 1.7 who are Latino and 1.2 million who are Black, according to the Center on Budget and Policy Priorities.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.