But as January 15 arrives this Saturday, there will be no check from the IRS coming to families for the first time since July. And as of now, there does not appear to be much urgency, at least publicly, for Congress to get it restarted.
The American Rescue Plan, passed in March 2021, increased the annual child tax credit to $3,600 for children under age 6 and $3,000 for kids age 6-17. From July through December 2021, eligible Americans were allowed to receive up to half the money in the form of monthly payments -- $300 for kids under 6 and $250 for children 6-17. They were also eligible to opt out of some or all the payments and potentially take the full amount when they file their taxes.
One of the stated goals of the monthly child tax credit and its increased amounts was to cut childhood poverty. The idea was to give parents money as they needed it rather than in one big chunk at tax time. It also gave the money to millions of families with low or no income even if they didn't earn enough money to pay income taxes or pay enough tax to qualify for the refund.
Why did the monthly child tax credit end?
The increased tax credit and advance payments expired at the end of 2021. The House passed a one-year extension as part of the $2 trillion Build Back Better domestic and environmental bill in November. But with no Republican votes in the 50-50 Senate and with Democratic Sen. Joe Manchin of West Virginia announcing he would not vote for the bill, its future is in limbo.
While there has been talk of continuing negotiations with Manchin or perhaps trying to pass an extension in a standalone bill, Democrats have been visibly shifting their focus in recent days to passing their sweeping elections and voting rights legislation. However, that legislation also received a significant blow from another Senate Democrat on Thursday when Sen. Kyrsten Sinema of Arizona announced she would not support changing filibuster rules.
On the child tax credit, Manchin has stated he wants a requirement that it only go to people who have jobs and his office has reportedly said Manchin wants the money targeted to those who need it most. CNBC reported Manchin wants an income cap of around $60,000 to receive the credit.
For 2021, it was $75,000 for individuals and $150,000 for couples who file taxes jointly. But it also allowed people who don't normally file taxes, particularly those with little or no income, to receive the credit.
The nonpartisan Center on Budget and Policy Priorities (CBPP), citing U.S. Census Bureau data, said in December that 91% of households with incomes below $35,000 spent the money on food, utilities, rent or mortgage, clothing and education. CBPP estimates nearly 10 million children in the U.S. will be thrown back into poverty or slip deeper into poverty without the advance payments.
What happens next with the child tax credit?
If there is no extension, then the child tax credit in 2022 returns to what it was before the American Rescue Plan. It's $2,000 per child up to age 16 -- not 17 -- for individual parents making up to $200,000 and couples filing jointly making $400,000. But there is no monthly installment option and the money will be paid all at once as part of tax returns filed in 2023.