Monthly payments from the newly enhanced federal Child Tax Credit begin today, marking a historic breakthrough in fighting child poverty. The payments are part of the American Rescue Plan Act (ARPA), which will help reduce child poverty in the United States by more than 40%.
How does the expanded credit work?
ARPA boosted the maximum Child Tax Credit from $2,000 per child to $3,000 per child. It also increased the maximum for children under age 6 to $3,600 per child. And ARPA made the credit fully refundable. This means families will receive the full value of the tax credit even if they have little or no income.
About 94% of Alabama’s children ‒ more than 1 million kids across the state ‒ will benefit from improvements to the credit. By default, most households will receive half of the money in the form of monthly payments from July through December. Those payments will be up to $250 per child, or up to $300 per child under age 6.
Families will receive the other half of the money in a lump sum after filing 2021 income taxes next year. If households choose to opt out of monthly payments, they can receive a single lump-sum payment after filing 2021 taxes.
The expanded credit is a great start to boost economic security for Alabama families, but the improvements are only temporary. The expansion is due to expire next year unless Congress agrees to renew it. That’s why lawmakers urgently need to expand the credit permanently in the next federal COVID-19 relief plan.
What do you need to do to sign up for the expanded credit?
- Most families are already signed up for Child Tax Credit payments. If you’ve filed tax returns for 2019 or 2020, or if you signed up with the Non-Filer tool last year to receive a stimulus check from the Internal Revenue Service, you will get the monthly Child Tax Credit payments automatically. You do not need to sign up or take any further action.
- If you aren’t already signed up, you still can do so by clicking here. Even better, if you haven’t yet received any stimulus payments for which you are eligible, you can get those by signing up as well. Note: These payments do not count as income. Signing up won’t affect your eligibility for other federal benefits like the Supplemental Nutrition Assistance Program (SNAP) or WIC.
- To opt out of monthly payments and get your refund as a lump sum after filing 2021 taxes, click here.
Who is eligible for the expanded credit?
ARPA increased the maximum Child Tax Credit from $2,000 per child to $3,000 per child for most kids. The maximum credit increased from $2,000 to $3,600 for children under age 6. The credit also now covers 17-year-olds.
All families will get the full credit if they make up to $150,000 a year for a couple or $112,500 a year for a family with a single head of household. Couples who make up to $440,000 a year or heads of household who make up to $240,000 are eligible for partial credits.
How can you help spread the word?
Make sure your family, friends and neighbors know about the expanded Child Tax Credit! You can send them this helpful two-minute video, courtesy of the Economic Security Project and the Groundwork Collaborative.