Paying a tax credit score for a kid reduces monetary anxiousness for 56% of households
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In August, millions of American families received the second of six child tax prepayments – hundreds of dollars a month for those with eligible children.
Only one payment has already helped, as data shows.
According to a recent survey by ParentsTogether Action, a national parenting organization, 56% of families reduced financial worries if they only received their first monthly child tax break in July. More than half of those surveyed said paying was a “huge deal” and another 40% said it was “helpful” for their family budget.
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“These payments really help a lot of parents meet the ongoing bills they have month-to-month,” said Ashley Burnside, policy analyst at the Center for Law and Social Policy. “Things like food, school supplies – really the essentials that help families to meet their basic needs.”
The new child tax credit
The American Rescue Plan earlier this year expanded the existing child tax credit, added monthly prepayments, and increased the benefit from $ 2,000 to $ 3,000 with a $ 600 bonus for children under 6 for the 2021 tax year.
The first half of the loan will be provided in monthly direct deposits through December, and the second half will come when families file their 2021 tax returns next year.
Most American families with children are eligible for a portion of the loan, and the full benefit goes to married couples with adjusted gross income of up to $ 150,000 and single parents up to $ 112,500.
In August, payments were made to 61 million children, according to the IRS and the Treasury Department. That was around 1.6 million more than the first payment received in July. The average payment was about $ 428 in August and $ 423 a month earlier.
How parents spent the first payment
Parents who received their monthly child tax credit wasted no time spending it on their families, data from the US Census Bureau shows.
Almost half spent the money on groceries, lowering the food insufficiency rate for households with children by more than 20%.
About 10% said they spent the money on childcare, including 17% of those with at least one child under the age of 5, according to data from the Census Bureau. Difficulty paying expenses also decreased, increasing from 31.5% of households with children who struggled to meet their expenses before the first payment to 29% afterwards, the data shows. During the same period, the financial hardship for adults without children increased.
“This is exciting in many ways because it is a real opportunity to seriously address and reduce poverty, especially child poverty, in the US,” said Otis Rolley, senior vice president of the US Equity and Economic Opportunities Initiative Rockefeller Foundation.
Other surveys show a similar use of money. According to MagnifyMoney data from July, 45% of parents made initial payments on groceries, 44% on school supplies, 38% on savings, and 36% on household bills.
This is exactly how the payments should help families, experts said.
“For those who are financially weakest, it is often not an issue that they need financial education, they need capital,” said Rolley. “And seeing how they used that capital further confirms those points.”
Families who have not yet signed up for the loan still have time to do so through an IRS portal and will receive monthly payments after enrollment until the end of the year.
The extended child tax credit including the monthly payments is currently only valid for the tax year 2021, so that the benefits could be canceled if it is not extended.
But the Democrats want to keep the added benefit longer. Among other benefits for families with children, the expansion of the extended child tax deduction is included in the $ 3.5 trillion budget proposal published in early August.
House Democrats want to move ahead with budget dissolution as early as next week as they work to pass a $ 1 trillion infrastructure plan.
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