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It’s a historic day for US families with children.
About $ 15 billion was sent to 35.2 million families in the first of six advance child tax credit payments, according to the U.S. Treasury Department and the IRS. The average first-round payment is $ 423 and will reach nearly 60 million children, the agency said.
“For the first time in our country’s history, American working-class families are receiving monthly tax breaks to pay for basic necessities such as doctor visits, school supplies and groceries,” Treasury Secretary Janet Yellen said in a statement. “This huge tax break for the middle class and this move to reduce child poverty is a remarkable economic victory for America – and a moral one too.”
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The expanded child tax credit is one of the largest anti-poverty measures in the US since President Lyndon B began the fight against poverty monthly, according to senior Treasury officials.
“It’s a huge deal,” said Arohi Pathak, policy director for the Center for American Progress’ Poverty to Prosperity program. “[The child tax credit] is a great relief for far too many working parents and especially in this pandemic. “
The extended child tax credit
The American rescue plan passed in March supplemented the existing child tax credit. For 2021, the maximum credit for children under 6 years of age is $ 3,600 and children 6-17 years of age are $ 3,000. The regular child discount was $ 2,000 for children under the age of 17.
Half of the money will be distributed as an advance on the 2021 tax credits in monthly payments from July through December – the second half will be claimed when families file taxes next year. For full benefit households, payments are $ 300 per month for children under 6 years old and $ 250 per month for children 6-17 years of age.
There is no limit to the number of eligible children who can receive credit. For example, a family with three children ages 5, 8, and 10 who qualified for full credit would receive $ 800 per month.
Full credit is available to eligible households with Adjusted Gross Income less than $ 150,000 for married couples and $ 75,000 for individuals. Extended credit ends for married couples filing $ 170,000 per year together and individuals making $ 95,000 even though they are still eligible for regular child tax deduction.
Families who would rather get the entire loan in one lump sum for the next year can do so by declining the monthly payments through an IRS portal. So far, around 1 million households have done so, the agency said.
Effects of enlargement
In addition to giving families with children more money, the increased loan has also been fully repaid to ensure that the poorest households benefit from the aid.
A fully repayable loan means families do not need to have taxable income to receive the benefit. This will reach around 27 million children, according to the Center for Budget and Political Priorities, making up half of the black and Latin American youth who were previously unrecognized.
“It’s aimed at the people who need it most,” said Joanna Ain, associate director of policy at Prosperity Now, a financial literacy nonprofit.
With the change, the increased credit will reach nearly 90% of children, according to the IRS. It will also lift about 4.1 million above the poverty line, including 1.7 million Latinos, 1.2 million blacks and 814,000 Asians, according to the Center on Budget and Policy Priorities. This will lower the child poverty rate by about 40% and get even more out of deep poverty, according to the center.
Our position was clear – we have to make the child tax credit permanent
US representative, D-Conn.
Another estimate from Columbia University’s Center on Poverty and Social Policy found that the increased tax credit would reduce child poverty by 45% and poverty for black children by 52%, for Hispanic children by 45%, and for Native American children by nearly 62% .
The timing can also help offset programs that helped families get through the pandemic but will end soon, such as supplemental unemployment insurance, the eviction moratorium, and the mortgage deferral program.
Confusion for some families
Of course, some of these families may have difficulty accessing the loan. If they traditionally have not filed a tax return and have not used the IRS non-filer tool to request an economic impact payment, they will need to register for the money on the agency’s website.
This has led to confusion for some. Nearly 80% of non-applicants said they heard little, little, or nothing about the new child tax break, according to a recent survey by SaverLife, a nonprofit, and the Economic Security Project.
Still, families who are late signing up for the loan will receive the full half they owe in advance payments, according to senior administrators. That would likely result in fewer, but higher, payments before December, according to the agency.
Currently, the credit is only available for the 2021 tax year, so the monthly payments will be stopped abruptly in December.
However, the legislature urges that the service be expanded or made permanent. President Joe Biden has proposed keeping the increased credit in his infrastructure package for the coming years, and several Democrats in Congress want to make the advantage permanent.
“Our position was clear – we need to make the child tax credit permanent,” said MP Rosa DeLauro, D-Conn., At a press event on Wednesday. “We have a real chance here not just to throw money into a problem, but to build an architecture for the future and use this as a moment to raise up all children and families.”
Although no law has yet been passed, the Treasury Department and the IRS are preparing for the program to last more than a year.
“It’s nobody’s plan that this only exists for 2021,” a senior administration official said on a call with reporters on Wednesday.
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