- The 2021
child tax credit could benefit more families than in previous years. - It will be especially beneficial to low-income families who couldn't get the credit previously.
- Insider estimates over 30 million million households could get the child tax credit for 2021.
The recently enacted $1.9 trillion
The American Rescue Plan expands the child tax credit for 2021, widening how many people with children would be eligible for the credit. The credit amount would also be greater, up to $3,600 per child under 6 years old and up to $3,000 for children who are between 6 and 17 years old. The amount was up to $2,000 per child who were under 17 years old in previous years.
It also includes people who may not have previously qualified. As Insider's Liz Knueven reported, people who were eligible had to make at least $2,500 annually to qualify for the credit previously.
The expanded credit could be key to dramatically slashing child
Because more people will fall under the eligibility requirements, Insider decided to look at how many people could benefit from the child tax credit for 2021.
To do this, Insider used household-level data from the Census Bureau's 2020 Current Population Survey Annual Social and Economic Supplement available through the Minnesota Population Center's Integrated Public Use Microdata Series (IPUMS). This data allowed us to get a baseline estimate of how many people may qualify for the full amount.
We took a look at households that had at least one child that was 17 years old or younger. We assumed children lived with the people who indicated they had a child. Because one of the requirements for the child tax credit is for the child to be a US citizen, national, or resident alien, we excluded households headed by non-citizens, although this may have removed some households where children could still qualify.
Finally, we only included those filing as single, jointly, or head of household who made an adjusted gross income at or less than the cut off values to receive the full amount of the 2021 child tax credit.
Based on this data, we found around 30.3 million households would be eligible for the full amount of the child tax credit.
It is important to note Insider's estimate is a general, back-of-the-envelope, look at how many households could benefit. It may exclude or include some people who wouldn't necessarily qualify because they do not meet one of the eligibility requirements.
Additionally, more Americans could get part of the credit if they earn more than the cut offs for the full amounts. The maximum adjusted gross incomes to get the full amounts are an adjusted gross income of $75,000 for single filers, $150,000 for those married filing jointly, and $112,500 for those filing as head of the household.
Overall, most families will benefit from this credit. The Tax Policy Center recently wrote that over 90% "of all families with children will receive an average benefit of $4,380." Additionally, they add that people in the lower-income percentiles will receive a similar average of benefits to those who belong in higher percentiles.
Recurring payments are set to start going out in July
As Insider's Tanza Loudenback reported, the stimulus package said that families who qualify could opt in to recurring payments beginning in July; otherwise, families can claim their maximum credit on their 2022 tax returns. But don't worry if you haven't been able to opt in yet: information on how to do so hasn't been released yet.
While the expanded credit is worth eight times its total cost, according to one report, it's still just a one-year program. Some Democrats - including President Biden - have already indicated that they want to make the program permanent, meaning that families might be able to receive those payments for years to come.