Everything You Need To Know About The Child Tax Credit

President Joe Biden’s signature program will start delivering monthly checks to parents on July 15.

Starting Thursday, most American families will start receiving a check for as much as $300 per child every month through the end of this year, as part of the $2 trillion American Rescue Plan’s expansion of the child tax credit that congressional Democrats passed in March.

The first set of payments, amounting to $15 billion this month to be sent out by the IRS, will reach more than 35 million American households, covering just under 88% of children in the United States, according to a White House official. 

Here’s what you need to know about the program.

History of the child tax credit and how it has changed

The U.S. has had a version of the child tax credit since the late 1990s. But it’s always been small. It began as a $400 credit in 1997 and has gradually increased since. And it was focused on reducing taxes. As such, it didn’t put much extra cash into families’ pockets. 

Children have long suffered the highest poverty rate of any age group in the country. For nearly two decades, Democrats have sought to not only increase the benefit, but to transform the tax credit into something that could also help the very poor. 

Republicans, however, have been reluctant to change the tax credit into anything that resembled welfare or a direct-cash benefit. They doubled the child tax credit in their 2017 Tax Cuts And Jobs Act to $2,000 a year through 2025, but limited how much of the credit could go toward increasing a family’s cash refund.

Then the coronavirus pandemic happened. Suddenly, Republicans and Democrats were signing on to direct cash payments — the stimulus checks. When Democrats won full control of Congress and the White House, they also made changes they had long wanted to the child tax credit.

Democrats increased the credit to as much as $3,600 per child and made it fully refundable. All American families with incomes up to $400,000, including those that don’t make enough money to pay taxes at all, can receive the benefit. And Democrats told the IRS to distribute the credit in advance, as monthly checks through December.

What families should expect

Families with a joint income of less than $150,000 will receive $3,600 per child under the age of 6, and up to $3,000 for children between ages 6 and 17, in 2021. Every child under the age of 17, born by the end of 2021 is eligible. Distributed monthly through December, eligible families will receive $300 per month for each child under age 6, and $250 for kids 6 to 17. The payments will be made on the 15th of each month, unless that date falls on a weekend or holiday.

Democratic Reps. Alexandria Ocasio-Cortez and Jerry Nadler of New York listen as Majority Leader Chuck Schumer speaks about t
Democratic Reps. Alexandria Ocasio-Cortez and Jerry Nadler of New York listen as Majority Leader Chuck Schumer speaks about the expanded Child Tax Credit during a press conference on July 8.

The remaining credit will be distributed when families file their 2021 tax returns.

Two-earner households earning more than $150,000 and up to $400,000 annually will receive periodic payments as well, totaling $2,000 per child. 

Most families that regularly pay taxes or received the stimulus checks in the last year and a half will receive these monthly payments automatically and don’t need to sign up for anything.

If families don’t want to receive the credits incrementally and in advance, and would rather get the entire amount when they file their 2021 taxes, they can choose to opt out of receiving monthly advance payments through the IRS website

Families that do want the payments in advance, but have relied on the child tax credit in the past to reduce their tax liability, should budget accordingly. The money from the credit itself does not count as income, and therefore isn’t taxed. But because money will be paid in advance, some families might want to change their tax withholdings so they’re not surprised by a bigger tax bill next April.

You can get this tax credit even if you don’t pay taxes, but there’s an extra step

This money will be automatically sent to families that file taxes. But parents with incomes so low they don’t need to file taxes must use a separate online portal to sign up for the benefit, unless they received the stimulus checks earlier this year.

Some parents have had issues with the government website. It requires having an email address before inputting any personal information, is only in English and, for most people, only works on desktop computers or laptops. The online tool looks identicato the government website the IRS used last year to distribute stimulus checks to this same population.

The White House says it is working on making the portal more accessible, but did not put a timeline on when those changes would be made.

Reaching this low-to-no-income population will be a major challenge for the IRS, which has partnered with the Social Security Administration and other government departments to get information on families that don’t have to pay taxes.

If the government succeeds in reaching these people and delivering their checks, this policy has the potential to cut child poverty in the United States in half.

This is only through 2021 — for now

Sens. Michael Bennet (D-Colo.), and Sherrod Brown, (D-Ohio) co-sponsored the Senate's child tax credit expansion bill.
Sens. Michael Bennet (D-Colo.), and Sherrod Brown, (D-Ohio) co-sponsored the Senate's child tax credit expansion bill.

This expanded version of the child tax credit is set to expire in 2021. 

President Joe Biden has been reluctant to advocate for it to be made permanent, likely because of the cost. Instead, the White House proposes to extend this expanded child tax credit through 2025, when some Republican tax changes are set to expire as well. 

As Democrats negotiate a special package of policies to help American families, however, cost will be a factor. And it’s possible the extension could be shortened even further.

That said, Democrats designed this credit in such a way that allowing it to fully expire will be politically very costly. Not only is this child tax credit fully refundable so that poor families can benefit and child poverty can be cut, Democrats increased the benefit overall. Letting the credit expire essentially increases taxes on people who had been receiving the credit, including those in the middle class.

A group of Democratic lawmakers, including Reps. Suzan DelBene (Wash.), Rosa DeLauro (Conn.) and Ritchie Torres (N.Y.), along with Sens. Sherrod Brown (Ohio), Cory Booker (N.J.) and Michael Bennet (Colo.), has been lobbying Biden to agree to a permanent expansion of the child tax credit.

In a statement last month, the legislators called the program “the most significant policy to come out of Washington in generations,” and said “Congress has an historic opportunity to provide a lifeline to the middle class and to cut child poverty in half on a permanent basis.” 

New York Cares volunteers in partnership with a local nonprofit and state Assembly Member Catalina Cruz distribute holidays t
New York Cares volunteers in partnership with a local nonprofit and state Assembly Member Catalina Cruz distribute holidays toys and winter coats in Corona, Queens, in December.