July’s Child Tax Credit Cut Child Poverty Rate 25% Which Makes Compelling Case for Extension
The child tax credit program that was part of the American Rescue Plan could be considered a success, so far. It worked to reduce the child poverty rate by 25%, says a Columbia University analysis, lifting more than 3 million children out of poverty. According to the statistics, the first installment of the plan reduced the monthly child poverty rate from 15.8% to 11.9%.
The Center on Poverty & Social Policy out of Columbia University uses a different metric than the federal government to define poverty. The U.S. government determined child poverty percentages based on the number of kids living in households below the poverty line. The federal poverty line for a family of four in the 48 contiguous states and Washington D.C. for 2021 is $26,500 annual income. Columbia University uses a slightly higher number, of $2,300 per month for a two-adult, two-child family. By calculating per month, rather than annually, it allows a clear picture of real-time changes in child poverty.
What Is the Child Tax Credit?
The American Rescue Plan increased the child tax credit from $2,000 per child up to $3,600 for children under age 6, and $3,000 for children age six and up. Additionally, the IRS began disbursing the credit as advance payments starting July 15 and will continue doing so through December 15.
Reaching Families Through Education
The first wave of payments reached the families of more than 59 million children, or 80% of kids in the U.S., the Columbia study said. The August payments reached an additional 1.6 million children, as more people learned about the program and were able to opt-in, even if they hadn’t filed tax returns in recent years. These families received the July and August payments together.
Zachary Parolin, a researcher at Columbia University and report co-author, told CNBC that another 2 million or 3 million children may still be eligible for the tax credit.
The report said that if the credit can reach all the children who are likely eligible, it could reduce monthly child poverty by up to 40%. “The potential for the benefit is huge, but only if these children and their families are able to access [it],” Parolin told CNBC.
Is An Extension Possible?
With the positive effects the advance child tax credit has had on reducing child poverty, Washington Democrats are discussing legislation to continue the payments through 2022, CNBC reported.
If you would prefer to opt-out of receiving the advance credit and, instead, claim the credit as a lump sum on your 2021 taxes, you have until August 30 to opt out of the next payment, to be disbursed September 15, 2021.
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