Help is on the way for Kentucky families with the arrival of payments through the American Rescue Plan Act’s child tax credit, which began Thursday and will continue through December.
The Kentucky Center for Economic Policy said the families of almost 1 million Kentucky children – and 66 million children across the country – will begin receiving these monthly payments: $250 each month per child ages 6 to 17 and $300 each month per child under the age of 6. Half of the credit will be paid out to families in monthly installments starting Thursday and the other half on their 2021 tax return.
“Experts estimate (the American Rescue Plan’s) improvements to the (child tax credit) will reduce child poverty in Kentucky by 44% this year,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy.
“Research shows that programs like this are linked with long-term benefits for kids, including better health, higher educational attainment and increased earnings later in life. Congress must make (the American Rescue Plan’s) landmark improvements to the credit permanent and secure this monumental victory in the fight against child poverty,” Bailey said.
The American Rescue Plan boosted the amount granted by the tax credit from $2,000 per child to $3,600 for children younger than 6 years old and $3,000 for children between 6 and 17 years old.
The legislation, passed by Democrats with no Republican votes, also eliminates a provision that previously barred almost half of Kentucky children from receiving the full credit, the Kentucky Center for Economic Policy said. As a result, the poorest 20% of Kentucky families with children will see their annual incomes grow by one-third, receiving $4,240 more on average of the year.
“This is a middle-class tax cut,” President Joe Biden said Thursday, trumpeting the change as a way for parents to pay for braces, tutoring and other child care costs.
“To give you a sense of how transformative this is, this would be the largest ever one-year decrease in child poverty in the history of the United States of America,” Biden said, reiterating his desire to continue the tax credit.
“We can afford it by making people at the top – big corporations, over 50 of which paid no taxes last year at all – finally just start paying their fair share,” Biden said. “People who are working hard and paying taxes deserve a break.”
In Kentucky, “its positive impact will be felt by over 90% of children,” Terry Brooks, executive director of Kentucky Youth Advocates, told the Daily News on Thursday.
Brooks called on Congress to sustain the tax credit expansion permanently; otherwise, it would be a “cruel tease” for families hoping to escape poverty for good, he said.
Without further action by Congress, the current enhancements will expire after this year. However, Biden has proposed extending them as part of his American Families Plan, which is now before Congress.
“We cannot allow this to be a one-off,” Brooks said.
Brooks also urged lawmakers in Frankfort to pass a similar tax credit at the state level to enhance the benefits, adding that such a program would be a “catalytic force for Kentucky’s families.”
Generational poverty is the biggest stumbling block for improving the well-being of Kentucky’s children, Brooks said.
The payments are not taxable and do not influence qualification for other assistance programs, such as the Supplemental Nutrition Assistance Program or Medicaid.
Families may be eligible to receive these payments, even if they don’t typically file a tax return for income reasons, the Kentucky Center for Economic Policy said. Doing so requires visiting an IRS online portal (irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool).
Families who have already filed 2019 or 2020 taxes or who signed up for stimulus payments will automatically receive advance payments in July, the center said.
Here’s what else families need to know, according to the Kentucky Center for Economic Policy.
- Families can also use the IRS website portal to find out if they are eligible, to opt-out of advanced monthly payments if they’d rather receive the total lump sum at the end of the year, to see a list of payments and to make changes to their banking information. Soon, they’ll be able to update information such as their home address, marital status, number of children and income. The IRS has said these resources will eventually be available in Spanish.
- Most families who receive advance monthly payments will not owe anything when filing their taxes because the second half of the credit will be applied then. However, some people may want to consider opting out of the advance payments: for instance, if their income increased this year over the new eligibility thresholds (see below) or if they claimed children as dependents last year but won’t this year because of custody arrangements.
- Married couples with incomes less than $150,000 and single parents (also called heads of households) with incomes less than $112,500 will qualify for the full expanded credit, with the credit gradually phasing out for incomes above those thresholds.
– For more information on the Child Tax Credit, Kentuckians can go online to childtaxcredit.gov.
– Follow education reporter Aaron Mudd on Twitter @NewsByAaron or visit bgdailynews.com.