Child tax credit is next coronavirus stimulus check: All you need to know

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Child tax credit is next coronavirus stimulus check: All you need to know
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Another round of stimulus checks seems unlikely for now. This doesn’t mean that Congress won’t send any more stimulus payments. In fact, millions of Americans will start to get another form of coronavirus stimulus checks starting in July: the enhanced child tax credit.

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Child tax credit is next coronavirus stimulus check

The IRS is set to send out the first instalment of the enhanced child tax credit (CTC) on July 15. As per the agency, about 88% of families in the country with kids would get this payment automatically.

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This enhanced child tax credit is part of the $1.9 trillion American Rescue Plan (ARP), the same package that approved stimulus checks of up to $1,400. With the ARP, President Biden raised the existing child tax benefit from $2,000 to $3,000 for kids between 6 and 17 years, and up to $3,600 for kids below 6.

Eligible families will start to get 50% of these credits in advance from July 15 (until December). This means eligible families with kids below 6 years would get a payment of up to $300 per month for each qualifying dependent child. Those with a child between the ages of 6 and 17 would get up to $250 per child.

The IRS will send the payment on the 15th of each month in 2021. So, the qualifying families will get up to $1,500 to $1,800 per kid by the end of 2021.

About 39 million families with over 65 million kids would benefit from the enhanced child tax credit. The Biden administration claims the program would help lift more than 5 million children out of poverty this year.

How much credit will you get?

A point to note is that these payments are a credit against your 2021 taxes. So, technically they should come after you file your 2021 taxes. But, to help people amid the pandemic, Congress is sending 50% of the credit as an advance (from July to December). The rest of the 50%, i.e. the payment for January through June 2021, you will get when you file your 2021 return in 2022.

As with the coronavirus stimulus checks, the IRS will refer to your 2020 tax return to determine your eligibility and the amount you qualify for. Those who haven’t yet filed their 2020 return would get the payment on the basis of their 2019 return.

Once you file your 2021 return, the IRS will decide whether you were overpaid or underpaid, and accordingly, adjust the balance payment.

Talking about how much you would get, individuals with adjusted gross income below $75,000 ($112,500 for heads of household and $150,000 for married taxpayers filing jointly) would qualify for the full amount of credit. The payment for those with income above this level will reduce by five cents for each dollar.

The enhanced child tax credit is set to expire after December 2021. However, Biden, in his American Families Plan, proposed to extend it through 2025.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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