DES MOINES, Iowa — This week some Iowa parents could be seeing a boost in their bank accounts or a check in the mail from the federal government. The first monthly installments of the new child tax credit approved by Congress will be disbursed.
Under the American Rescue Plan, the annual tax credit is being increased per child with an option to be paid out as monthly stipends as opposed to claiming it as a credit when filing income taxes. The hope is that Americans can help turn the economy around by giving them their rightfully owed money upfront.
“It’s an advance payment of a benefit that typically you have to wait until tax time to get,” says Mark Steber, Chief Tax Information Officer with Jackson Hewitt Tax Service, “It’ll help millions of Americans offset expenses while still stabilizing after the pandemic.”
Parents with a household income of less than $150,000 in 2020 qualify. Children ages 0-5 qualify for a $300 per month tax credit and children ages 6-17 qualify for a $250 credit. The payments will be made monthly through December.
Steber says the tax credit is as simple as it sounds — the government giving you your money early — but there are some situations where the credit can get tricky.
“So there can be a scenario where you’re a taxpayer, you start getting these monies … but that child is not yours this year. You shared custody with another parent, or they’ve moved out or they’ve gotten older, you’ll have to pay that money back if you don’t otherwise qualify on your tax return,” says Steber.
In that case, he says parents should take advantage of their ability to opt-out of receiving the funds.
The enhanced tax credits expire at the end of this year, but President Joe Biden has said he would like to see them extended.