The monthly child tax credit begins July 15.
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Parents eagerly awaiting the start of monthly child tax credit payments on July 15 should start planning how they will use the extra money now.
The child tax credit was boosted by the US bailout, signed by President Joe Biden in March. The new enhanced credit increases the annual benefit per child aged 17 and under to $ 3,000, from $ 2,000 for 2021. It also provides an additional benefit of $ 600 for children under 6 for the year of. taxation 2021.
The full extended benefit is available to all children aged 17 and under in families whose adjusted gross income in 2020 is less than $ 75,000 for lone parents and $ 150,000 for a married couple filing jointly, and ends for individuals earning $ 95,000 and married couples jointly filing $ 170,000 (although they are still eligible for the regular child tax credit.)
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Monthly payments could reach $ 300 per month for children under 6 and $ 250 per month for those aged 6 to 17 for those living in families eligible for full credit. For now, monthly payments are expected to continue until the end of the year, and families will claim the remainder of the credit when they file their 2021 taxes in 2022.
This is a large sum that many families must receive on a monthly basis. Those waiting for the payments should start thinking now about what to do with the windfall, according to Tania Brown, certified financial planner for the Atlanta area and coach at SaverLife, a nonprofit focused on savings.
âOnce the money comes in, the emotions take over,â she said. “Have a plan of action.”
Schedule monthly payments now
Thinking about how they’ll use the extra money each month can help families get the most out of the money, Brown said.
“I would start to think about their plans now [are] for the money, âBrown said, adding that the last thing she would want is for families to come to the end of the year – when monthly payments are about to end – and feel like ‘they don’t have much to show for help.
As with any tax refund, there is no limit on how families can spend the money they receive from the child tax credit, giving people a lot of leeway in deciding what to do with it. best way the extra money can help, depending on their situation.
This is important, especially for low-income families and those hardest hit by the pandemic, according to Natalie Foster, co-chair of the Economic Security Project, a progressive anti-poverty nonprofit. .
âFamilies know what they need, and families’ needs change from week to week,â said Foster, adding that common needs can include paying for car repairs, child care, rent, food and more. “This is the type of medium that has no strings attached.”
How will families get credit
In addition to planning how to use the extra money each month, families need to make sure they know how they are receiving the credit. For about 80% of families, the money will be directly deposited into the same account they told the IRS to use for their 2020 tax refund, the agency said.
Others who did not select direct deposit when filing 2020 taxes will receive a paper check or debit card, according to the IRS.
Families who still haven’t filed 2020 tax returns but would qualify for the credit should make sure to submit their tax information to the IRS, even if it’s after the official deadline. This ensures that the IRS has the most up-to-date information about your family and where to send any benefits due.
The timing of payments may change
It is important for families to remember that the enhanced child tax credit and monthly payments will only last for one year, with monthly payments starting in July and running through December.
âIt will be a game-changer for families starting in the summer, but it will be temporary,â Foster said.
After that, the remaining credit will be claimed when filing a 2021 tax return and will be delivered in a lump sum with the rest of what the family is owed to the IRS. This will likely change the way they should budget for funds – families may need to find their own ways to save effectively so that credit can come in handy over time.
Of course, it is also possible that new legislation will further expand credit. The Biden administration’s proposed U.S. Family Plan would extend the enhanced benefit until 2025, and a group of other Democrats are pushing for credit and monthly payments to become a permanent benefit.
To see how much you could expect to receive, the Grow personal finance website created a calculator that takes into account your filing status, annual income, and number of dependents.