Expanded Child Tax Credits Begin Today

By:
Chris Gaetano
Published Date:
Jul 15, 2021
iStock-182500182 Family Leave Child Adventure

The Treasury Department and the IRS announced that the first wave of expanded child tax credits were sent out today.

The program, a major part of the American Recovery Plan Act, represents a significant revision of the way the child tax credit is distributed. First, the credit is worth $3,000-$3,600 rather than $2,000 per child, and the age limit for qualifying children has been raised from 16 to 17. More significantly, the credit will be paid out in monthly payments throughout the year rather than all at once at tax time, making it act more like a social service.

About $15 billion worth of payments of up to $300 were distributed to families with nearly 60 million eligible payments, the first of several monthly stipends that will continue until they get about half of the total value around the end of this year; following that, families will get the other half when they file their taxes next year. 

“For the first time in our nation's history, American working families are receiving monthly tax relief payments to help pay for essentials like doctor’s visits, school supplies, and groceries,” said Treasury Secretary Janet L. Yellen. “This major middle-class tax relief and step in reducing child poverty is a remarkable economic victory for America—and also a moral one.”   

Economists believe that when families get money, they usually spend it on goods and services, which is beneficial for the businesses that provide them. The child tax credits, by giving parents regular payments, are estimated to give the economy a boost as well.

Poorer families are anticipated to spend the credit on keeping food on the table, enacting home repairs or paying rent; more financially secure families are predicted to use their money on goods such as laptops, new clothes for school or other discretionary items.

Either way, economists believe that that the main beneficiaries of the new spending, besides the families themselves, will be retailers such as Walmart, Target or Costco, as well as auto parts suppliers. Because the payments will be smaller than the lump sum stimulus payments that Americans previously received, the effect on the economy will probably be smaller, but still noticeable. 

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