By: Carmen Reinicke @CSREINICKE
In August, millions of American families received the second of six advance child tax credit payments — hundreds of dollars per month for those with eligible kids.
Just one payment has already helped, data shows.
For 56% of families, receiving just the first monthly child tax credit payment in July reduced financial anxiety, according to a recent survey from ParentsTogether Action, a national parenting organization. More than half of those surveyed said the payment was a “huge deal,” and another 40% said it was “helpful” to their family budget.
“These payments are really helping a lot of parents meet existing costs that they have on a month-to-month basis,” said Ashley Burnside, a policy analyst at the Center for Law and Social Policy. “Things like food, school supplies — really the essentials that help families meet their basic needs.”
The new child tax credit
The American Rescue Plan earlier this year expanded the existing child tax credit, adding advance monthly payments and increasing the benefit to $3,000 from $2,000 with a $600 bonus for kids under the age of 6 for the 2021 tax year.
The first half of the credit is being delivered 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 to receive some money from the credit, and the full benefit goes to married couples with up to $150,000 in adjusted gross income and single parent families with up to $112,500.
In August, payments went out to 61 million children, according to data from the IRS and Treasury Department. That was a roughly 1.6 million increase from how many received the first payment in July. The average payment was about $428 in August and $423 a month earlier.
How parents spent the first payment
Parents who received the monthly child tax credit money wasted no time in spending it on their families, data from the U.S. Census Bureau shows.
Nearly half used the money for food, slashing the food insufficiency rate by more than 20% for households with children.
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 Census Bureau data. Difficulty paying expenses decreased as well, going from 31.5% of households with children having trouble covering their costs before the first payment to 29% after, data shows. In the same time period, financial hardship increased for adults without children.
“This is exciting in many ways because it’s a real opportunity to seriously address and slash poverty, particularly child poverty, in the U.S.,” said Otis Rolley, senior vice president of the U.S. equity and economic opportunity initiative at the Rockefeller Foundation.
Other surveys show similar use of the money. According to July data from MagnifyMoney, 45% of parents spent the first payments on groceries, 44% on school supplies, 38% on savings and 36% on household bills.
This is exactly how the payments were intended to help families, experts said.
“Those who are financially most vulnerable, often it is not an issue that they need financial literacy, they need capital,” said Rolley. “And seeing how they used this capital further validates those points.”
Families not yet signed up for the credit still have time to do so through an IRS portal and they will receive monthly payments through the end of the year once enrolled.
The enhanced child tax credit, including monthly payments, is currently only for the 2021 tax year, meaning that the benefits could reverse if it is not extended.
But Democrats want to keep the extra benefit around for longer. Extending the enhanced child tax credit, among other benefits for families with children, is included in the $3.5 trillion budget proposal released in early August.
House Democrats are looking to move forward with the budget resolution as soon as next week, as they simultaneously work to approve a $1 trillion infrastructure plan.
Original article on CNBC: https://www.cnbc.com/2021/08/19/one-child-tax-credit-payment-cut-financial-anxiety-for-56-percent-of-families.html