Starting on July 15, 2021, roughly 39 million households will see more COVID-19 relief money deposited into their bank accounts or sent via check or debit card. Like the recent $1,400 stimulus checks, this money was authorized by the American Rescue Plan Act, which was signed into law by President Joe Biden in March.
The money that’s coming this time isn’t from a stimulus check, though. Instead, the IRS will be distributing funds into the bank accounts of parents who qualify for the newly expanded Child Tax Credit.
Approximately 88% of children in the United States will be eligible for these payments, and they will continue on a monthly basis until the end of the year and maybe for longer. Here’s what you need to know.
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Monthly coronavirus stimulus payments are on the way
The American Rescue Plan Act went beyond providing a one-time $1,400 direct payment. It changed the rules of the existing Child Tax Credit so that millions of American families struggling with personal finances would receive more ongoing help.
Under the old rules, a $2,000 Child Tax Credit was available for qualifying families. However, the credit wasn’t fully refundable — only $1,400 of it was. When a credit isn’t refundable, it can only be used to reduce your taxes. If you don’t owe $2,000 to the IRS, you can’t take full advantage of it. That meant many lower-income families who didn’t have high tax bills would get just $1,400 per year per child.
Now, all eligible families with kids will be entitled to a tax credit valued at $3,600 per year if they have a child under six or $3,000 if they have a child between six and 17. This credit is fully refundable, so you’ll get the money even if you pay nothing in taxes at all. Parents with older children may also qualify for a payment of up to $500 for 18-year-old children or dependent students between the ages of 19 and 24.
And while you claimed the old Child Tax Credit on your tax return, the new Child Tax Credit is going to be distributed differently — it will be sent as an advanced tax credit just like the stimulus checks were. That means parents will receive a deposit from the IRS right into their bank accounts or will get mailed checks or a debit card if the agency doesn’t have their bank information.
The IRS recently announced those payments would begin on July 15, 2021
The first payment will begin arriving on July 15, 2021 and will be for either $250 or $300 per child depending on the child’s age. And another payment will be made every month from July to December of this year. This means half of your credit will be paid out before the end of this year, and you’ll claim the other half when you file your 2021 tax return.
The Biden administration has also proposed extending this expanded Child Tax Credit through 2025. If legislation passes to do that, then these monthly checks could continue for several years as long as you have qualifying children.
Will you get the additional coronavirus stimulus money?
Not everyone is entitled to the expanded Child Tax Credit. You will get the full amount if your adjusted gross income is under:
- $75,000 as a single filer
- $112,500 as a head-of-household tax filer
- $150,000 if you file your taxes as married filing jointly
Once your income exceeds these thresholds, payments phase out at a rate of $50 per $1,000 in excess income.
The Biden administration has estimated that around 90% of families with kids qualify for money, though. This means that most people will see more money from the government very soon. So watch your bank account this summer for this latest financial relief.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/39-million-households-to-get-more-coronavirus-stimulus-money-starting-july-15/