How to Rework Your Budget if Monthly Child Tax Credit Payments Stop

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Here's what to do if those installment payments don't continue into 2022.

Key points

  • The boosted Child Tax Credit is staying in place for 2022.
  • While monthly installment payments could continue next year, that's not guaranteed.

The Child Tax Credit has existed for many years. But this year, it got a significant boost that's helped a lot of recipients shore up their finances.

Last year, the Child Tax Credit was worth up to $2,000 per child, and only $1,400 of that total was refundable. That meant if a family owed no tax, they wouldn't get their full $2,000.

This year, the Child Tax Credit is worth up to $3,600 for children under the age of 6 and up to $3,000 for children aged 6 to 17. The credit is also now fully refundable, regardless of tax liability.

Another big change to the Child Tax Credit is that half of it was made available this year in the form of monthly installment payments. Those payments began hitting bank accounts in July and have done a great job of helping families manage their income in the face of rising costs.

But as of now, December is the last month we know those monthly payments will come in. Lawmakers plan to keep the boosted Child Tax Credit in place for 2022, but Congress still has to make that official and also approve monthly installment payments for the coming year. People who have been counting on those monthly payments should prepare in case they stop coming in.

Adjusting your budget accordingly

Your monthly Child Tax Credit payments may have helped you manage your bills since the summer. But another thing has happened since the summer -- inflation has reared its ugly head. Now, the cost of just about everything from gas to apparel to groceries has gotten higher. And so, you may need to cut back on non-essential spending to compensate if those monthly payments go away.

Take a look at your budget and identify any expense that falls into the non-essential category. That includes everything from your cable plan to the store-bought coffees you occasionally treat yourself to.

Next, see what your monthly income will look like without those monthly Child Tax Credit payments. From there, figure out how much non-essential spending you'll need to cut to avoid spending more than what you earn in a given month.

Say you have one 8-year-old child and have been getting a $250 monthly Child Tax Credit payment since July. If that $250 has allowed you to avoid landing in debt month after month, you may need to cut $250 from your budget if your paycheck can't pick up the slack.

In addition to cutting back on non-essentials in your budget, it pays to look at your essential costs and see if any can be tweaked. If you own a home, for example, refinancing your mortgage could result in lower monthly payments. If you rent, you can approach your landlord and see if there's any wiggle room to lower your monthly housing payments. You can even offer to barter in exchange for a rent reduction -- for example, help out with administrative work a few hours a week to shrink your costs.

Prepare to make changes

It's too soon to know how the Child Tax Credit will be paid in 2022. Monthly payments could continue, or they may come to an end, forcing recipients to wait for a lump sum payment in the form of a tax refund. If the latter will wreak havoc on your budget, prepare to follow the above steps. It's a better bet than landing in debt while you wait for the money you're owed to arrive.

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