As part of President Joe Biden’s $1.9 trillion COVID relief package — the new law that has been giving most Americans $1,400 stimulus checks — working families can expect to receive up to $3,600 per child for 2021.
Half of that will come in the form of cash, as monthly payments due to start this summer. They’ll be another kind of stimulus check, to help millions of parents deal with basic bills or pay down debt.
The money is the result of a temporary expansion of the child tax credit. IRS Commissioner Charles Rettig (pictured) had warned a few weeks ago that the new checks could be delayed, because the tax agency was overwhelmed. But this week, he offered Congress better news.
How do these new stimulus checks work?
Every household with children that qualified for the latest, $1,400 stimulus check is set to receive the child credit cash.
If yours is a family headed by a couple earning less than $150,000 or an individual making under $75,000, you’re slated to get a $250 monthly payment for each of your kids ages 6 to 17, from July through December. For children under 6, you’ll receive $300.
In total, depending on how old your kids are, you’ll receive a credit of either $3,000 or $3,600 for this year. The monthly payments will account for the first half, while the other half will be refundable next year when you file your taxes for 2021.
This temporary change to the credit provides families with up to $1,600 more per child that can be used however you like: for family expenses, debt, savings — or even investing. One popular investing account you could open for your kids would allow them to grow their savings merely by adding “spare change.”
In previous years, you could claim a credit of only as much as $2,000 per child, and just $1,400 was refundable. Under the expansion of the credit, single parents earning more than $75,000 and couples with incomes over $150,000 won’t receive the full payments but may still qualify for some support.
What if your family has a ‘new addition’ this year?
Let’s say you have a young family with a 3-year-old and 6-year-old. You can expect to receive $550 every month from July to December; if you claimed the child credit for the kids last year, they’ll be accounted for on your tax return and you should be set to receive payments.
But if you welcome a baby into the family this year, can you get checks for the new addition?
Tucked into the relief bill is a request for the IRS to set up a new online portal where families can update their information, including the number of qualifying children.
The hope is that this portal will be up and running by July, so you’ll just be able to go online and enter the information about that joyful reason for all the sleepless nights you’re now having.
If you don’t give the IRS an update through the portal, you’ll have to wait until you file your 2021 taxes to claim the $3,600 credit for your family newcomer.
What’s the deal with the timing?
IRS chief Rettig recently warned members of Congress that the portal and the monthly payments could be slow in coming because the agency was swamped from dealing with the $1,400 stimulus payments and the annual onslaught of tax returns during a later-than-usual tax filing season.
It started roughly two weeks behind schedule, and the filing deadline has been delayed by about a month, to May 17.
“I don’t have the resources to devote to that portal until the filing season ends,” Rettig had told the House Ways and Means Committee. He added that getting the montly child tax credit payments out “might be a challenge.”
But on Tuesday, the commish had a different response during a Senate Banking Committee hearing. Democratic Sen. Sherrod Brown of Ohio asked whether the IRS was aiming to start sending out the checks on time, in July.
“We are,” Rettig said. “If we end up not being on track for some unforeseen situation, we will advise you and the committee.”
He vowed: “We will launch by July 1 with the absolute best product we are able to put together.”
What if you can’t wait and need money now?
If you don’t qualify for the enhanced credit, or you can’t wait for the extra relief, here are some options to find more cash right away:
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Cut the cost of your debt. If you’ve been relying on credit cards throughout the pandemic, expensive interest is bound to catch up with you. A lower-interest debt consolidation loan can fold your balances into a single, more affordable payment — and help you find freedom from your debt sooner.
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Become your own insurance adjustor. You may be overpaying for insurance by hundreds every month. With everyone staying home during the pandemic and driving much less, some car insurance companies have been giving customers price breaks. Not yours? Shop around for a better deal. Plus, you can save on homeowners insurance by comparing rates to find a less expensive policy.
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Refinance your mortgage and slash your payments. Though mortgage rates have been rising in recent weeks, they’re still at some of the lowest levels in history. Refinancing your current home loan could save you thousands of dollars over the next year. Mortgage tech and data provider Black Knight says 11.1 million mortgage holders could refi and cut their monthly payments by an average $277.
