WASHINGTON (FOX 5 DC) - Parents and guardians across the country got a welcome surprise in their bank accounts Thursday morning. It’s the first day new child care tax credits went into effect. President Joe Biden says the credit is meant to help middle-class families and combat child poverty.
Eligible families are now receiving monthly payments of up to $300 for each child under six and up to $250 for each child aged 6 to 17. The tax credits were passed under the American Rescue Plan back in March.
Today at the White House, the president called this a landmark program that would lift many children out of poverty.
"I say we can afford it by making people at the top and big corporations--over 50 of which pay no taxes last year at all--finally just start paying their fair share," President Joe Biden said. "We're not going to gouge them, just pay their fair share because people who are working hard and paying taxes deserve a break."
Roughly $15 billion has been sent to families of nearly 60 million children. Right now, these expanded credits are due to end in December, but President Biden is pushing to extend them until 2025 with some Democrats in his own party want to make the benefit permanent.
Here’s a closer look at how the payments work and who can receive them:
HOW BIG ARE THE CREDITS?
The credit is $3,600 annually for children under age 6 and $3,000 for children ages 6 to 17. But six months of payments will be advanced on a monthly basis through the end of the year. This means eligible families will receive $300 monthly for each child under 6 and $250 per child older than that.
This is a change from last year, when the credit totaled $2,000 per child. Families who did not owe the government income taxes were also unable to claim the credit, a restriction that Biden and Congress lifted.
ARE THERE LIMITS ON WHO CAN QUALIFY?
The payments begin to phase out at incomes of $75,000 for individuals, $112,500 for heads of household and $150,000 for married couples. Higher-income families with incomes of $200,000 for individuals and $400,000 for married couples can still receive the previous $2,000 credit.
HOW CAN YOU APPLY?
If you filed taxes and the IRS already has your bank account information, the payments should be deposited directly into your account on the 15th of each month. The Treasury Department estimates that 35.2 million families will receive payments in July. If you didn't file taxes in 2019 or 2020, you might still be eligible for the credit and can apply here.
WHY ARE THE PAYMENTS MONTHLY?
Advocates say the monthly payments can help smooth out an impoverished family's income, making it easier for them to budget and less dependent on high-interest lenders.
CAN THE MONTHLY PAYMENTS BE STOPPED?
Yes. Some people are used to the child tax credit enabling them to get a refund on their taxes. They might not want the monthly advance and about 1 million people have opted out, according to administration officials. People can unenroll here.