Beginning July 15, 39 million American households will begin receiving enhanced child tax credit payments as part of the Biden administration’s goal of cutting child poverty in half this year.
The monthly payments will be based on households’ 2020 tax returns, or their 2019 returns if last year’s returns are still outstanding. Eligible families will receive $300 per month for every child under age 6 and $250 for every child ages 6 to 17, and most payments will be deposited directly into parents’ bank accounts.
Previously, families in the U.S. could receive a tax credit of up to $2,000 per child under age 17, but the enhanced benefit, passed as part of the American Rescue Plan, raises the limit to between $3,000 and $3,600 per year depending on the child’s age. Half of the credit is also offered in the form of monthly direct payments rather than the whole credit coming as a lump sum at tax time, though recipients can opt for the latter method through an online Internal Revenue Service portal.
The enhanced payments are expected to cover 88% of American children, with the full benefit available to those with adjusted gross annual incomes of up to $75,000 for single parents and $150,000 for married couples filing jointly, and partial benefits available to single parents earning up to $95,000 and joint filers making up to $170,000. The regular child tax credit can still be claimed by higher-income earners.
For the 23 million or so children whose parents’ incomes are too low to file taxes, the enhanced credit has been made fully refundable (rather than partially refundable, as with the standard credit) and families can register their information online directly with the IRS to claim their payments and any missed stimulus checks.
Just as those payments boosted U.S. retailers as recipients directed their cash back into the economy, the coming child tax credit deposits are expected to be a potential boon to parts of the industry, especially those serving low- and middle-income consumers. Because half the credit will be paid out in six advance monthly installments, parents will be able to count on the direct deposits as they make purchasing decisions throughout the year, including during crucial seasons such as back-to-school and holiday.
On Target’s latest earnings call, Christina Hennington, the company’s chief growth officer, spoke optimistically about the second half of the year, with payments coming during the same time as family-oriented occasions such as Thanksgiving, Halloween, and the return to school.
Currently, Biden has called for the enhanced benefit to be extended through 2025, though some Democratic lawmakers are pushing to make it permanent.