Child Tax Credit advance payments aid family budgets

Child Tax Credit advance payments aid family budgets


By:  Greg Alexander

Parents are seeing an unexpected financial boost this fall.

Starting in July, parents across the country began seeing some relief to the bottom line of their family budget. Child Tax Credit (CTC) advance payments started to arrive, with little explanation. So, what is this credit and why are you receiving it?

The CTC was in place several years ago, but was significantly expanded in 2021 as part of the American Rescue Plan, a $1.9 trillion economic stimulus package passed by Congress in March as a way to spur the economic slowdown caused by the pandemic. Families with children under 6 will receive up to $1,800, which should arrive in six monthly payments of $300, for each qualifying child. Those with children from 6 to 17 will receive up to $1,500, paid in six monthly payments of $250. Nearly all middle- and lower-income families and single parents qualify for the credit.

The good news is that most families began receiving these payments automatically, as either a check in the mail or a direct deposit to their bank account. But not everyone is in the loop. Eligible low-income families who weren't required to file a 2019 or 2020 federal tax return should still receive their payments, but first need to register using the IRS Non-filer Sign-up Tool. This can be found at www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool and a step-by-step guide is available at www.irs.gov/pub/irs-pdf/p5538.pdf.

In Oregon, Senator Jeff Merkley's office is helping constituents access the Child Tax Credit, and families with issues or questions can call 503-326-3386, or submit a question online at www.merkley.senate.gov/contact.

For most families, the additional money has been a welcome surprise. Many have been able to pay off credit card debt and get their families on more solid financial ground. Others, who have fared better in the past year, are using it to cover child care costs or tucking some of it away in a college savings fund.

Marc and Sharon Austin of Pendleton applied some of it to clothes shopping for their preschool twins. "We also purchased supplies like hand sanitizer for the daycare they attend," Marc adds. "We enrolled them in swimming lessons at the aquatic center, though we probably would have done that anyway. I think overall the advance payments have enabled more flexibility in our budget to buy the usual items kids and families need to thrive."

The American Rescue Plan may have another benefit for families. Parents may be able to write-off more of their child care expenses on Form 1040 next April, through an expansion of the Child and Dependent Care Credit. For 2021 only, the maximum benefit has increased to $4,000 for one eligible individual and $8,000 for two or more. Check with your tax preparer or search the IRS website for more information.