Stimulus Update: Lawmakers Need to Act Quickly to Avoid Lapse in Monthly Child Tax Credit Payments
The last monthly installment payment will arrive this week if lawmakers don't extend them.
- The Child Tax Credit got a boost for 2021, and monthly installment payments have been going out since July.
- House Democrats passed a measure to extend the boosted credit and its installment payments to 2022, but a Senate vote is needed to keep those payments in place.
The COVID-19 pandemic has impacted a lot of families financially, and those who lost their jobs and had no savings to fall back on during the crisis became heavily reliant on government aid. One such relief measure was the various stimulus check rounds that hit Americans' bank accounts. Lawmakers also boosted the Child Tax Credit for 2021 -- a move that has already helped pull millions of children out of poverty.
Prior to 2021, the Child Tax Credit maxed out at $2,000 per child, and only a portion of it was refundable. This year, the Child Tax Credit is worth up to $3,600 for children under the age of 6 and $3,000 for those aged 6 to 17. The credit is also now fully refundable, which means households with no tax liability can still receive the complete sum they're eligible for based on the age of their children.
Lawmakers also changed the way the Child Tax Credit is paid. Normally, tax credits are claimed on a tax return and are paid in one lump sum, in the form of a tax refund. This year, half of the boosted Child Tax Credit has been paid in monthly installments, the first of which began in July.
At this point, recipients of the credit still have one more installment payment to look forward to in 2021, and it should hit bank accounts this week on Dec. 15. But if lawmakers don't act quickly, those monthly payments could go away after that, leaving many households in a serious financial lurch.
A huge impact
House Democrats recently passed a $1.7 trillion measure known as the Build Back Better plan, and it includes a one-year extension of the boosted Child Tax Credit. Initially, lawmakers were hoping to extend the credit for a longer period of time or even make its boost permanent, but then settled for a one-year extension when cost-related concerns arose.
Now, the proposal needs to make it through a Senate vote in order to continue the monthly installment payments many households have come to rely on. But if lawmakers don't act quickly, families won't be in line for a monthly payment in January. And that could cause many to fall behind financially, especially at a time when inflation is causing everyday expenses to cost a lot more than usual.
So far, the boosted Child Tax Credit -- and the fact that it's been made available in the form of monthly installment payments -- has had a huge impact on lower-income families in particular. In fact, the majority of families with incomes under $35,000 have spent some or all of their installment payments on basic necessities like housing payments, utilities, and food, reports the Center on Budget and Policy Priorities.
Furthermore, while the credit has helped many households shore up their finances already, much of that progress could be reversed if it's not extended to 2022. In fact, in that scenario, almost 10 million children are at risk of falling back below the poverty line or deeper into poverty.
But it's not just that the boosted Child Tax Credit has done a great job of cutting poverty rates. It's also helped middle-income households increase their own financial security.
Earlier this year, the Social Policy Institute surveyed families who were expecting to receive the enhanced credit, and nearly 75% of respondents said they planned to use that extra money to save up for emergencies. Meanwhile, almost 42% said they'd use the money to build an education fund for their children.
Not surprisingly, households with an income of $50,000 or less were more likely than higher-income households to say they planned to use that money for essential expenses. The point, however, is that this year's enhancement has done more than just address poverty issues. It's also made a huge difference in the lives of families with moderate income. And if lawmakers don't act quickly, millions of Americans could struggle or see their financial plans upended come 2022.
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