The Child Tax Credit has been among the important ways through which American families have been helped out against the extremely high expenses incurred while raising their children. The recent buzz is on whether a potential CTC payment of $300 is forthcoming from the IRS in July. This article focuses on explaining what the Child Tax Credit is about, the recent developments in legislation, and if a family is likely to get its payment in July.
What is the Child Tax Credit?
The Child Tax Credit is a tax benefit designed to offset some of the costs of raising children. Historically, it was paid in one lump sum each year when families filed their taxes. Over the years, the amount of the credit has changed but often proved to be of huge help to eligible families.
Changes to the Child Tax Credit
In response to the economic challenges brought in by the COVID-19 pandemic, ARPA introduced dramatic changes within the Child Tax Credit in 2021. These changes are projected to offer more immediate and substantial financial help for families:
- Increased credit amount: In tax year 2021, the credit increased from $2,000 to $3,000 per child aged 6-17 and $3,600 per child under 6.
- Advance monthly payments: Rather than in a lump sum at tax time, the IRS began distributing half of the credit in advance monthly payments. This provided for families to receive up to $300 monthly from July 2021 to December 2021 for children under 6 and $250 per child aged 6-17.
- Broadened eligibility: The limits for the full credit were increased, which further expanded the pool of eligible families. Phase-outs began at $150,000 for married couples filing jointly and $112,500 for single parents or head-of-household filers.
Alleged $300 pay off in July
Information swirling around about a July CTC payment worth $300 likely has to do with advance monthly payments that were incorporated by the ARPA in 2021. Those advance payments, though, applied only to tax year 2021. The ARPA’s work towards monthly CTC payments was not extended beyond December 2021—sans further legislative action.
Legislative actions and proposals
There have been discussions and legislative proposals that aim to further extend the Child Tax Credit enhancement and advance monthly payments for the same. However, no legislation had been passed as of now that would allow resumption of the monthly payments to continue for 2022 and 2023. No proposals to extend advance monthly payments through broader social and economic policy packages circulated in early 2022 despite being highly politically challenging; therefore, the enhanced benefits under ARPA and, by extension, the monthly payments terminated at the close of 2021.
Current status of the Child Tax Credit
For tax year 2023, the Child Tax Credit will revert to its pre-ARPA form: families can claim up to $2,000 per eligible child when they file their taxes. The credit is no longer available as advance monthly payments but is received as a lump sum when families file their taxes.
Separating fact from fiction
The IRS will not schedule a $300 Child Tax Credit payment in July at this time. Advance monthly payments under the American Rescue Plan Act of 2021 were temporary for the tax year 2021 and have not been extended. Though families can still claim benefits of the Child Tax Credit upon filing, all reports that parents get a $300 check in July are unfounded, and there has been nothing to prove it through current legislation or announcmaint: None of the rumors floating around about parents getting a check from the IRS in July 2021 holds truth.
The IRS website is the best source of information and updates regarding the Child Tax Credit. Parents can check it frequently or consult with a tax professional to understand whether they are eligible for the benefits accruable under the currently applicable tax laws.
