Written on behalf of Feigenbaum Consulting
The United States’ expanded child tax credit program is about to get underway, meaning many working American families can expect to see monthly payments arriving in their bank accounts. The 39 million or so American families who qualify will start receiving payments (largely without having to take action) by July 15.
Expanded program follows stimulus package
US President Joe Biden announced the expanded program as part of a $1.9 trillion stimulus package called the “American Rescue Plan Act.” The plan introduces an increase to the amount qualifying families can receive, giving people $3,000 (up from $2,000) per year for children under 17 and an additional $600 per year for children under the age of 6.
In order to qualify for the full payment, a family would have to have an income of less than $75,000 for single parents and $150,000 for married couples. The enhanced credit will not be available for single parents making $95,000 or couples making $170,000. In those cases, families will receive the original amounts.
According to the Institute on Taxation and Economic Policy, the enhancements (along with other stimulus measures) could cut child poverty in half. In fact, the child tax credit expansion alone should bring more than 6 million American children out of poverty.
How will families receive the child tax credit?
Payments from the Child Tax Credit will be rolled out through monthly payments as well as a lump sum at the end of tax season. About half of the money will be deposited monthly starting on July 15. The remaining amount can be claimed on 2021 tax returns. This is intended to provide some cash to families on a regular basis while also providing some protection for people in the event that they earn more than is allowed to receive the full credit. If any of the credit is still payable, the families will receive it as a tax refund, while if there are taxes owing, the remaining credit can be applied against those taxes.
In addition to economic qualifications, there are other criteria that must be met. All eligible children must have a valid Social Security number. The children must also live with the parent(s) for at least half the year and be related to the adult claiming the credit. Finally, the person claiming the credit must provide more than half of the child’s financial support, including food, lodging, utilities, repairs, clothing, education, and other costs.
For parents who don’t want to receive the payment, perhaps because they earn more than they can to qualify this year but would have qualified last year, applications to unenroll can be made in a monthly basis. While the deadline has passed to unenroll for July, the deadline to do so before the August payment is August 2, 2021.
Contact the experienced lawyers at Feigenbaum Law for a custom solution to your personal tax planning needs. Our unparalleled knowledge of US and Canadian tax makes us leaders in this field. Contact us about making your transition across the border as smooth as possible. We offer services to clients in the US, Canada and around the world. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll free at (877) 275-4792.