Updated May 26, 2020
One of my favorite things about pro-bono tax prep: the moms who Work Me Over to make sure they get their full Child Tax Credit. Hands down, my fiercest filers. ?
For 2021, the Child Tax Credit (CTC) has been increased from $2000 max per child to either $3000 for each kid 6-17, or $3,600 for each child under 6. This is awesome new development requires a little more explanation – unlike prior years, payments are rolling out in 2021 and 2022, rather than as a credit at tax time. This post will dig into the details of what you can expect.
Why the 2021 Child Tax Credit Increase is a Big Deal
I cried, standing in my nightgown in my kitchen, when I saw this news. Why? To qualify for the Child Tax Credit, a women needs to have an earned incomes less than $75,000 and children. In other words, middle and low income, working, single moms. $2000 tax free is a huge deal, and increasing it to $3000/3600 lifts a huge number of children out of poverty.
Recent statistics from the Census Bureau show one in seven kids now live in poverty. It’s still a gut-punch seeing this, and you may be living it yourself. 30% of single-parent households with children live in poverty. This cuts it to 16%. Overall, it reduces the number of children living in poverty by 45%. (Here is some great on research on the impact of the bill from Columbia University. Roar Lions Roar!).
I work with a lot of single moms who work several jobs and gigs to cobble together $30,000 to support their kids, while paying thousands for childcare. Because the CTC is refundable, it’s guaranteed cash in hand. Talk has begun to extend the new child tax credit extends beyond this year. I hope so.
When should you expect your first payment, though?
When Will You Get Your CTC Payment
The IRS says the first payments will automatically arrive to families on July 15. “Roughly 39 million households — covering 88% of children in the United States — are slated to begin receiving monthly payments without any further action required.” Additionally, the government will roll out two portals where taxpayers can update their information to ensure they get the credit, as well as the unemployment tax refund. The American Recovery Act requires payments to start by July and to pay half the credit in advance.
The IRS will calculate the payments off of 2020 taxes, another reason it’s important to file even if you had no income in 2020. Additionally, payments will roll out both as checks and direct deposits, based on how you file.
Keep in mind the summer schedule for payments is still a bit iffy – our good friends at the Internal Revenue Service need to process 150 million tax returns and stimulus payments they got no warning on. We will have to wait for more detailed information, even if that’s sometimes a frustrating process.
Just One Thing: The $3000/$3,600 is Paid in Increments
We would obviously all prefer to get one big check for either $3000 or $3,600 this summer. It won’t work that way, unfortunately, with the plan being monthly payments of $250 or 300, depending on the age of your children. You could wait until next year to get a lump sum, though that’s likely inconvenient if you’re already struggling.
Could the New Child Tax Credit Go On for Years?
Yes, the new CTC might go on longer, if nothing set in stone yet. Much of this also depends on who might be President in future years.
Discussions are already underway in Congress to make an extension happen. Should you choose to take the monthly payments, the final one would occur on or before December 31, unless renewed.
Many single women are going through similar financial struggles. Check out these tips on how to keep your family financially organized.
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