The new system is part of the American Rescue Plan, which increased the total credit from $2,000 per child in 2020 to $3,600 per child under age 6 and $3,000 per child ages 6 to 17.
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"We've heard loud and clear that the child tax credit will make a tremendous difference," said Radha Seshagiri, the director of policy and systems change at SaverLife, a non-profit organization that uses technology to help low and moderate-income households build financial stability.
Use the calculator below to find out how much you may get as part of the new child tax credit. Your information will not be stored in any way.
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Families will have the option to receive half of their 2021 child tax credit in the form of monthly payments between July and December. They'll get the remainder after filing taxes.
There's also the chance to opt-out of the monthly payments and receive the full amount as part of their 2021 tax return.
Seshagiri said monthly payments could be better for some families and lump sum payments could be better for others. She said many families save up for the big payments or use them for their savings accounts.
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"We can also see how monthly payments can help with bills, especially when communities of color and low-income communities been hard hit by the pandemic. And they're behind on rent and they're behind on utility bills and having those monthly payments come in the door, right now, will make a tremendous, tremendous impact, instead of waiting until next April," Seshagiri said.
Research from the Center on Poverty and Social Policy at Columbia University shows the new tax credit could reduce the child poverty rate by an estimated 45% nationwide and even more for children of color.
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Not all families will receive the full amount. Income thresholds for receiving the full amount depend on your filing status. Couples making less than $150,000, those who filed as "head of household" making less than $112,500 and those who filed as "single" making less than $75,000 will be eligible for the full amount.
Credits for those making more than the thresholds will be phased down to a minimum credit of $2,000 per child for married couples making less than $400,000. For all other filing statuses, the threshold for the $2,000 is $200,000. For those making more, the credit is gradually phased out to zero.
So far, the increased tax credit is only for 2021.