About 39 million families will start receiving payments from the new, refundable child tax credit on July 15, the Treasury Department announced Monday.
Authorized by the $1.9 trillion American Rescue Plan signed into law by President Joe Biden in March, the expanded and “newly-advanceable” tax credit will provide assistance to families that include about 88% of American children, the administration says.
Starting in July and continuing through the end of the year, eligible families will receive up to $300 per child under the age of 6 and up to $250 for those aged 6 to 17. Couples with incomes up to $150,000 and single filers with incomes up to $75,000 qualify for the full credit, which phases out at higher income levels.
Administration officials said about 80% of eligible households will receive the payments automatically through direct deposit. The monthly payments will provide half of the total credit, with the rest of the money coming as a lump sum paid as a tax refund.
Speaking at the White House, Biden portrayed the payments as a tax cut that was providing immediate relief to families. “We are getting you a tax cut this year — now, when you need it, and not have to wait,” Biden said. “This tax cut sends a clear and powerful message to American working families with children: Help is here.”
Biden also made a pitch to lawmakers to turn the temporary tax credit into a permanent benefit. “While the American Rescue Plan provides for this vital tax relief to hard-working families for this year, Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come.”
A major change: Democrats have expanded the existing child tax credit, raising its top value from $2,000 to $3,600 per child, and turned it into a payable benefit rather than a refund paid once a year, and then only to households that file taxes. The new tax credit structure is expected to slash childhood poverty in the U.S., at least temporarily, by providing more money and by reaching a much larger group of families, many of whom failed to receive benefits under the previous system.
The impact comes with a substantial budgetary cost, however. If Congress were to make it permanent, the child tax credit could cost more than $200 billion per year, potentially making it the largest single tax break.
