There are two more child tax credit advance payments remaining this year, scheduled for November 15 and December 15. But parents should feel hopeful that the credit will be extended for at least one more year after the child tax credit survived the massive concessions conservative Democrats demanded from President Biden‘s Build Back Better agenda, cuts that took the bill from $3.5 trillion to $1.75 trillion over a decade.
Plenty of worthwhile programs—free community college, paid family leave, Medicare expansion—didn’t make the cut. But if a bill that hews to the framework released by the White House yesterday is eventually passed into law, then the child tax credit, the monthly cash benefit to most parents that has lifted millions of children out of poverty, will survive for at least one more year.
Here’s what parents need to know about the future of the policy that has dramatically cut child poverty in the United States.
What makes the expanded child tax credit better for families?
First passed as part of the American Rescue Plan, the enhanced child tax credit is an improvement on the old child tax credit in three principal ways. It’s more valuable ($3,600 for kids 5 and under, $3,000 for kids 6-17, per child), more flexible (half can be paid out in monthly installments), and fully refundable (even poor parents who don’t make enough to pay income tax are eligible).
Unfortunately, the White House was only able to secure this improved benefit for one year, which brings us to the current debate over its future.
How long does the current Build Back Better framework extend the child tax credit?
That last aspect—the credit’s refundability—is made permanent under the terms of the framework. Unfortunately, instead of the permanent expansion sought by some progressive senators or the expansion until 2025 that the White House thought it could secure, the framework only extends the credit for one more year.
Who will be eligible for the child tax credit in 2022?
The framework released by the White House is just that, a framework, which means that it’s lacking a lot of crucial details for those of us trying to understand its implications. At this point, it’s unclear what the administration has planned and, without any legislative text to look at, there’s no way to know what the Democrats in charge want to pass—or whether there’s a specific plan they agree on at all.
Here’s everything the framework says about the child tax credit extension:
Extend for one year the current expanded Child Tax Credit for more than 35 million American households, with monthly payments for households earning up to $150,000 per year. Make refundability of the Child Tax Credit permanent.
Calling the plan an “extension” of the current expanded child tax credit does seem to imply that rules and requirements should largely stay the same. What’s confusing is that it could imply that the credit will end when a couple jointly files a tax return with $150,001 in adjusted gross income.
In 2021, $150,000 is the maximum income for joint filers to receive the entire credit, but those earning more (up to $400,000) can still receive a partial credit. (Single filers and heads of household follow the same rules with different income thresholds.) Whether or not that system will remain is unclear.
How much with the child tax credit monthly payments be worth in 2022?
Again, we aren’t exactly sure how the credit might change, but even if it remains the same the monthly payments will be cut in half. That’s because the American Rescue Plan was passed in March, and the IRS needed time to set up the monthly payments. They started in July, which means that only six will go out to parents this year.
In 2022, if the program is extended, the same amount of money (the half of the credit that Congress allowed to be disbursed on a monthly basis) will be spread out over 12 payments. So the $350 per child under six and $300 per child six to 17 years old would become $175 and $150, respectively.
While parents will certainly welcome an extension of the credit no matter when it’s passed, it would be nice to know that more than the few weeks’ notice they’ll likely receive if and when the Democrats can actually pass this bill. Unfortunately, the dysfunctional nature of the Senate means that even a policy that could pull 4.3 million kids above the poverty line can’t be continued without an excruciating political debate.