Stimulus Update: Third Child Tax Credit Payment Arrives Today as Lawmakers Fight to Extend That Lifeline
Parents should be on the lookout for their third installment payment.
Parents who check their bank accounts today should be in for a very happy surprise. The third installment payment of the expanded Child Tax Credit will be hitting accounts as parents grapple with the many expenses associated with sending their children back to school.
Most years, the Child Tax Credit is worth up to $2,000 per child under the age of 17, and only $1,400 of that $2,000 is refundable. This means that if a parent owes the IRS no money but qualifies for a $2,000 credit, that person will only get $1,400 back in tax refund form and will have to forgo the remaining $600.
This year, the credit works differently. For one thing, it's now 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, so if a parent owes no tax and is eligible for a $3,000 credit, that full $3,000 will hit that person's bank account.
Another big change is that half of the Child Tax Credit is being paid in monthly installments this year. The first installment payment went out in mid-July and the second arrived a month later. Today's payment represents the third installment of six, with the remainder of the Child Tax Credit to be paid in 2022.
When will this lifeline run out?
The expanded Child Tax Credit has already had a huge impact on parents' finances. More than 3 million households have experienced less food insecurity since those monthly payments started going out.
And earlier this year, a survey by the Census Bureau found that 57% of parents used their initial installment payment to cover back-to-school purchases. Were it not for the expanded credit, more families would've no doubt been forced to rack up debt just to get their children the items needed to kick off the school year.
Unfortunately, the enhanced Child Tax Credit is, as of now, only available to parents for the current tax year. That change was made as part of the $1.9 trillion American Rescue Plan, the massive coronavirus relief bill that was signed into law earlier this year. Come 2022, the Child Tax Credit is set to revert to its former state -- unless lawmakers are successful in getting the new and improved version extended.
Recently, House Democrats put forth a proposal to keep the boosted version of the credit in place through 2025. And some lawmakers are hoping that the enhanced version will actually become a permanent part of the tax code. Given that the boosted credit has the potential to keep millions of children above the poverty line, keeping it in place on a longer-term basis is certainly something worth fighting for.
The next installment payment under the Child Tax Credit won't arrive for another month, so parents should definitely aim to make the most of today's payment. For some, that will mean padding their savings or using that money to pay off existing debt. But for others, that will no doubt mean covering essentials that no family should have to go without.
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