As a parent, I know how expensive it can be to raise a child. It seems that every time I look at him, he’s grown out of his shoes again, put a new hole in the knees of his jeans, or needs something new for school. And that doesn’t even take into consideration the things he needs every day—like food, medications, and child care. While I am fortunate enough to be able to provide the support he needs, many families with kids struggle to meet the needs of their children.
The federal Child Tax Credit recognizes that families need support and helps offset the costs of raising children. It is a refundable credit meaning that if the credit exceeds the amount of taxes you owe, you receive the extra money back in your refund. Monday, June 21, 2021 was Child Tax Credit Awareness Day, a day that was set aside to ensure parents know about the availability of the credit and how to claim it.
The American Rescue Plan Act improved the Child Tax Credit for 2021 by increasing the maximum credit amount to $3,000 per child between 6 and 17 and $3,600 for children under 6 years old. That’s money that families can use to help pay for groceries, housing, kid’s clothing, child care, doctor’s visits and prescription costs, and will ultimately benefit the local economies as families use it to pay for these things. Families with incomes of up to $150,000 for a couple or $112,500 for a single parent are eligible for the full credit. According to an analysis by the Center on Budget and Policy Priorities, about 90%—or 1,970,000—Michigan children will benefit from this year’s improvements to the CTC.
The improved Child Tax Credit is fully available to families with the lowest incomes for the first time this year. That change has the power to reduce child poverty in Michigan by 44% statewide, including by 52% for Latinx children and by 43% for Black children. The improvements will lift about 249,000 Michigan children either above or closer to the poverty line, including 114,000 to be lifted out of poverty. Prior iterations of the Child Tax Credit, including expansions made during the Tax Cuts and Jobs Act, still left out families with the lowest or with no incomes from the improvements. The American Rescue Plan expansions will benefit about 810,000 Michigan children under the age of 17 who were previously left out of the maximum credit amount.
Additionally, starting in July, families can receive up to half their Child Tax Credit in advance monthly payments instead of in a lump sum when they file their taxes next year. These advance payments may be crucial for families, especially families with low to no earnings. The costs of raising a child don’t solely come up around tax time, and periodic payments will help families meet these regular budgeted costs, like food, housing, and buying things for school in the fall. Advance payments for eligible filers begin in July. Families who have already filed 2019 or 2020 taxes or who signed up for stimulus payments will automatically receive advance payments in July – no further action required. Other eligible families, including families who don’t normally file a tax return because they have no income, make too little to file taxes, or who may be underserved in other ways, can sign up using the IRS non-filer sign-up tool.
Congress has a real opportunity to improve kids’ long-term prospects for generations to come by making these Child Tax Credit improvements permanent. The American Rescue Plan provided for temporary improvements to the CTC, including increases to the credit, expanded eligibility, and advance monthly payments. And without action, these improvements will disappear next year. Lifting kids out of poverty improves their futures by improving health outcomes and educational outcomes like math and reading scores and higher rates of college entry. President Biden has proposed making these expansions permanent in his American Families Plan, and we thank Senators Stabenow and Peters for their continued support of making the expansions permanent.