While there’s doubt that the COVID-19 pandemic has created, and in many ways enhanced, economic hardships, it’s also provided the opportunity for positive change. Though it shouldn’t take a crisis to address disparities in public programming and welfare, the pandemic did create a pathway for relief legislation that can be potentially renewed or become permanent. Major relief plans in the United States began with the CARES Act in March 2020, and have continued with the American Rescue Plan in March 2021. The plan’s new child tax credit is perhaps the most important piece of legislation, providing a monthly stipend to households with children.
The child tax credit is incredibly ambitious, as it not only increases the funds given per child, but also expands the eligibility to more people. Those recurring monthly funds will equip families with a reliable stipend for recurring costs, as opposed to a yearly lump sum. However, families opting for the lump sum can unenroll for advanced payments.
On a monthly basis, children between ages 6 to17 are eligible for a credit of $250 per child, while children under age 6 are eligible for a credit of $300 per child. This reflects more than $1,000 annually over previous years.
The eligibility expansion provides for low-income families who were not previously eligible for child tax credits. Single-filer households with an income of less than $75,000 will receive the full credit. For head-of-household filers, the limit is $112,500, and less than $150,000 for married couples filing jointly. Unlike previous years, those who did not earn enough income to file taxes are able to claim their child tax credit through the non-filers tool.
Spreading the word about the increased child tax credit is essential. Low-income families who do not file taxes are in most need of this relief, yet they are unable to be automatically enrolled. About 10% of North Carolina families have eligible children, but will not automatically receive funding. This child tax credit will not impede upon other benefits such as SNAP and Medicaid.
Families should expect to receive these stipends around the 15th of each month for the months of July through December. Many have opted for direct deposits, but mailed checks are also available. Families can opt out of monthly checks at any time and the remainder of the money from the tax credit will be given in a refund check for the following tax year.
Currently, the tax credit is only a part of this year’s relief plan ending in December 2021. The increased child tax credit is included in President Biden’s proposed American Families Plan, which if passed, would extend its funding until 2025. A study released by the Center on Poverty and Social Policy at Columbia University, found that the American Rescue Plan, including the child tax credit, has the potential to reduce child poverty by 50%. The Kids Count Databook for 2021 maintains that this policy could be responsible for the largest one-year drop ever in child poverty. Databook authors feel that legislators will be more likely to make this a permanent change in order to avoid a subsequent surge in poverty a year later.
With so much economic hardship following the pandemic, an immense reduction in child poverty is a glimmer of hope. Continuing to spread the word about the child tax credit is pivotal, as only time will tell if the increased funding continues.
Amanda Monroe is an intern in NCCAA’s Fellows Program. She is working to address the Social Determinants of Health.