Included in the recently passed 1.9 trillion dollar American Rescue Act is a significant, one-year expansion of the child tax credit.
Parents will be eligible to receive up to $3,600 per child age five and under, and $3,000 per child age six to sixteen. The current child tax credit is $1,400 to $2,000 per child but it’s estimated nearly a third of children live in households that don’t qualify because their earnings are too low. The new legislation makes the credit fully refundable, meaning all households earning up to $150,000 a year and individuals making up to $75,000 a year qualify. The benefit caps at $8,000 per household.
The Act also will eventually allow parents to receive the credit in installments of up to $300 a month instead of collecting it on their tax return. Louisiana Partnership for Children and Families Director Susan East Nelson said that’s more useful than the current end-of-year lump sum.
“It could be the difference between having a child be taken care of by the neighbor down the street who is not trained in early childhood development and a family actually being able to afford high-quality childcare,” said Nelson.
The Treasury Department is still working out how the installment option will be handled and when it will be available. Democrats are optimistic it will be online as early as July.
Reports estimate the child tax credit expansion will cut child poverty by over 40 percent. Nelson called it a landmark policy.
“I think this test run is going to show people just how even a little bit of cash to these families can make such a difference,” said Nelson.
Congressional Democrats indicated they will explore making the expansion permanent later this year. The American Rescue Act awaits President Biden’s signature.
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