This Enhanced Child Tax Credit Feature Could Become Permanent

Here's some potential good news for parents.

The Child Tax Credit looks very different in 2021 compared to previous years. First, the credit has been boosted so that it's worth more money. Plus, half of it is being paid in monthly installments so recipients can get their cash sooner rather than having to wait for a tax refund.

And this year, the credit is also fully refundable. That means someone who owes no tax can still get the full value of the credit.

The enhanced Child Tax Credit has already had a huge impact on Americans' finances. For starters, many families have been able to more easily cover expenses. And with two more payments still in the works for this year, recipients have a chance to pad their savings accounts and buy themselves some protection against surprise expenses.

Unfortunately, though, the current version of the Child Tax Credit is not likely to become a permanent fixture of the tax code. While lawmakers initially wanted to go that route, Democrats have been forced to cut certain programs to move their now $1.75 trillion spending proposal forward. At this point, they're only pushing to keep the enhanced version of the Child Tax Credit around for one more year.

But one provision of the enhanced credit could become permanent. And that alone would benefit many households.

Full refundability may be here to stay

This year, the Child Tax Credit is worth up to $3,600 for children under 6 and up to $3,000 for kids 6 to 17. When that boost goes away, the credit will max out at $2,000 per eligible child.

But even once that happens, those who are in line to receive the credit may be able to get their full $2,000 -- even if they owe the IRS no tax. Previously, only $1,400 of the $2,000 Child Tax Credit was refundable, so families that didn't have a tax liability couldn't enjoy the credit's benefit in full. But now, lawmakers are including permanent full refundability of the credit as part of their spending bill.

What can the Child Tax Credit do for you?

Initial data reveals that the boosted Child Tax Credit managed to lift 3.5 million children out of poverty and reduce hunger rates among children. Even though the higher value of the credit won't become a permanent part of the tax code, full refundability of the credit is apt to help a lot of families by putting extra money in their pockets.

That said, one drawback is that going forward, that money may only be available in tax refund form. And that means families that don't normally file a tax return may have to do so to get their money.

This year, it was possible to get the Child Tax Credit without submitting a tax return. And to be clear, filing taxes isn't something everyone has to do, as low enough earners can be exempt.

If you've been enjoying your Child Tax Credit payments this year, make sure to claim the credit in future years. Even with the credit being worth less money, it could still do a lot to help you shore up your finances.