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This Year's Child Tax Credit Could Mean Extra Money In Your Pocket By Summer

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There's another provision in President Joe Biden's American Rescue Plan that could pump more money into your bank account.

Video Transcript

KYM GABLE: And there is another provision under the relief package that could put even more money into your bank account.

STACY SMITH: It is the largest-ever refundable child tax credit, and as money editor Jon Delano explains, you may start to see some of the money as early as July.

JON DELANO: With tax credits, you normally wait until next year to claim them on your tax return, but this is different. Even before you file your taxes next year, you may start to get cash for a special child tax credit this year. It's a one-time deal and a bit complicated.

BRYAN MENK: Nice thing about this is, it's now a fully refundable credit. Most credits will just reduce your tax liability, so you don't have to pay as much to the government, but you don't actually get money put back into your pocket. In this situation, you will get money put back.

JON DELANO: How much money? $3,600 for every child five or under and $3,000 for every child from six to 17, and one half of that money could be sent to you in advance in a monthly check.

BRYAN MENK: And starting in July-- at least, this is what the IRS is projecting right now-- they will start making monthly payments to you. If you're getting $3,600 for the child under the age of six, you'll get $300 per month. If it's a child who's say 12 years old, you'll get $250 per month, and then the rest of that will be claimed as a credit on your tax return in 2022.

JON DELANO: As long as you have filed a tax return, you don't have to do anything more.

BRYAN MENK: When you filed your taxes, you would have claimed these children as dependents. The IRS is also going to check with the Social Security Administration to see the age of your dependents and who your dependents are.

JON DELANO: If you earned too little to file a tax return, take note.

BRYAN MENK: Well, you have to file a tax return for 2020 to get that monthly payment.

JON DELANO: Single parents earning under $75,000 and married parents under $150,000 get this child tax credit, but that's 90% of Pennsylvania families.

CHUCK MARR: In one fell swoop, we will cut the child-poverty rate by about 40%.

JON DELANO: One wrinkle-- if your 2020 income makes you eligible but your 2021 income goes up and puts you over the limits, those monthly cash payments will have to be returned when you file next year's taxes. Jon Delano, KDKA News.