The Child Tax Credit wasn’t always as generous as it has been this year. In previous tax years, the credit maxed out at $2,000 per child under the age of 17 and was only payable as a single lump sum in tax refund form.
This year, the credit has been expanded to be worth up to $3,600 per child under the age of 6, and up to $3,000 per child aged 6 to 17. Also, the credit is partially being paid in monthly installments that began in July (50% of the credit will be paid on a monthly basis this year, while the remaining 50% will be paid as a lump sum next year).
So far, two monthly payments for the credit have hit Americans’ bank accounts. But that money has already had a huge impact.
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Less financial stress
Many families routinely grapple with financial worries. But in a recent survey by ParentsTogether Action, a national parenting organization, the first monthly Child Tax Credit payment alone reduced financial anxiety for 56% of families. In fact, more than half of those surveyed said the credit was a “huge deal” to their families, while another 40% said it was “helpful.”
While some families may be using their Child Tax Credit payments to pad their savings or enjoy extra spending money, many are using those payments just to cover their essential needs, like buying groceries or paying rent. And it’s for this reason that lawmakers are fighting to keep the expanded credit in place beyond the current tax year.
As of now, the enhanced version of the Child Tax Credit is temporary and applicable only to 2021. But lawmakers are working to extend the enhancement beyond this year, and there’s a chance that the current credit could become permanent. If that were to happen, it would no doubt allow many families to better manage their personal finances throughout the year.
Though many people who file a tax return wind up getting a refund, and that money can be helpful in catching up on bills, the timing of that money often can’t help people from landing in debt in the first place. What’s so beneficial about the current version of the Child Tax Credit is that half of it is paid in monthly installments from July through December, which means recipients have that added cash flow to look forward to and don’t need to wait a year to get the money they’re entitled to.
The average Child Tax Credit installment payment amounted to $428 in the month of August. Getting that sum every month for six months could help many families avoid having to carry credit card balances or take on other types of debt that could wind up being detrimental.
Between healthcare expenses, childcare costs, and school supplies, parents routinely face their share of bills, and many struggle to keep up. The fact that the Child Tax Credit is helping reduce financial stress for so many parents fuels the argument for keeping the enhanced version around well beyond 2021.