When the American Rescue Plan was signed into law, it did a lot more than just send out a round of $1,400 stimulus checks. It also expanded a very important tax credit — the Child Tax Credit.
Previously, the Child Tax Credit was capped at $2,000 per child. It’s now worth up to $3,600 per child. Also, the credit used to be paid in the form of a tax refund as one lump sum. This year, recipients are able to receive half of their credit in monthly installment payments between July and December, with the remaining 50% of the credit being payable in 2022.
So far, two of this year’s six installment payments have gone out in July and August. And that money is coming in handy for a lot of families.
If you’re sitting on Child Tax Credit payments, it’s important that you put that money to good use. Here’s how.
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1. Build or pad your emergency fund
The pandemic has certainly taught us the importance of having money in the bank for emergencies like unplanned bills and job loss. If you don’t have three to six months’ worth of living expenses on hand in a savings account, take this opportunity to boost your emergency fund. Having cash reserves could be your ticket to avoiding debt when the unexpected happens.
2. Pay off debt you’ve racked up
Many families landed in debt during the pandemic, and some had debt before it began. If you don’t need your monthly Child Tax Credit payments to cover essentials, you should jump at the chance to tackle some of your debt. Be sure to focus on credit card balances first, as those tend to charge more interest than other types of debt, like personal or auto loans.
3. Set yourself up for a better job
There are millions of job openings today, and boosting your skills could be your ticket to landing a better one than what you have now. You can use some of the money from your monthly installment payments to take a course that will position you for the type of job you want. For example, learning to better navigate the world of spreadsheets could help you climb the ladder, and a six-hour online course might teach you what you need to know.
4. Make your home more comfortable to work in
At this point, many people have been working remotely for roughly 18 months, and some companies are letting employees do their jobs from home for the foreseeable future. If that’s the case, it could pay to invest in a setup that will make your workdays more comfortable and productive. That could mean buying new office furniture, getting a new laptop or larger monitor, or even just putting in better lighting so you don’t strain your eyes.
While the Child Tax Credit may be worth a lot more money now, the current enhancement is only set to remain in place for the current tax year. Lawmakers are working to keep the expanded version in place longer, but there’s no guarantee that will happen. That’s why it’s so essential that you make the most of that money now — while you still have access to it.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/4-ways-to-make-the-most-of-your-monthly-child-tax-credit-payments/