The IRS will start to make monthly payments of the expanded Child Tax Credit from the American Rescue Plan on July 15, 2021. In Nebraska, roughly 434,000 children will benefit from this change, and approximately 36,000 children will be lifted above or closer to the poverty line.
This unrestricted funding will have profound impacts on Nebraska families. The Child Tax Credit, along with other temporary benefits passed in the American Rescue Plan, has the potential to cut childhood poverty in half and reduce income disparities for children and families of color. Programs like these also play an important role in supporting families’ stability and preventing the intervention of the foster care system. We know that the vast majority of children come into the child welfare system due to neglect, and helping families meet their basic needs can help keep families together.
While this policy will have a substantial, positive effect on families, its eligibility provisions unfortunately exclude some immigrant children. Children must have a social security number in order to be eligible for the credit. Parents are not required to have a social security number, but must have an Individual Taxpayer Identification Number (ITIN) to be eligible. We hope the President and Congress prioritize expanding the pool of eligible children so that all families who contribute important work in communities are also supported in order to meet basic needs.
The American Rescue Plan Act (ARPA) was signed into law by President Biden on March 11, 2021 to bring relief in the face of the Covid-19 pandemic. This package included another round of economic impact payments, expanded unemployment insurance, and increased funding for state and local governments. ARPA also included a very exciting form of direct relief to families that has the potential to cut childhood poverty in half – an increased Child Tax Credit.
The Child Tax Credit was first enacted in 1997 to help working families offset the costs of raising children. The American Rescue Plan temporarily increases the Child Tax Credit and makes the full credit available to many children. This means the full credit will soon be available, $3,600 for a child under 6 and $3,000 for a child 6 or older, and will be extended to more families with low or no earnings.
For example, a single parent with two children earning $10,000 a year previously received a Child Tax Credit of $1,125. Under the American Rescue Plan, that parent will now receive $6,600. A single parent with two children who has no income previously received no Child Tax Credit at all; that parent will now receive the full credit of $6,600.
These benefits will start becoming available to families in July. The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the Child Tax Credit as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit. Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so. The IRS will provide more information about advance payments soon.
Like many pandemic related benefits, the Child Tax Credit will only be available to families for one year. We support efforts, such as the President’s American Families Plan, which would make the fully refundable credit permanent and other expansions available through 2025.