The American Rescue Plan, which was signed into law in March 2021, not only provided stimulus checks to millions of people, but also increased the value of the Child Tax Credit.
Previously, the credit had a maximum value of $2,000 per child and was only partially refundable, meaning that families without tax liability could not receive the full $2,000 credit per child.
However, in 2021, the maximum value of the Child Tax Credit increased to $3,600 for children under age 6 and $3,000 for children aged 6 to 17, as stated in an article published by the U.S. Department of the Treasury on January 27, 2022.
According to the U.S. Department of the Treasury, in 2021, the Child Tax Credit became fully refundable and was paid out in monthly installments during the second half of the year.
This was particularly beneficial for families with children, as it helped them manage their living expenses amid rising inflation. The increased credit also had a significant impact, lifting millions of children out of poverty and helping households stabilize their finances.
According to an article by The Motley Fool published on December 23, 2022, there is disagreement among lawmakers regarding the rules of the Child Tax Credit. Some lawmakers want to impose a minimum earnings requirement for eligibility, while others argue that this would prevent low-income households from receiving the credit or collecting it in full.
While some lawmakers believe that the credit should not discourage work or replace the need for parents to find employment, others recognize the challenges that parents, especially those with young children, may face in holding down a job, such as the high cost of childcare that can effectively wipe out a paycheck or even exceed earnings.
It is unsure if the Child Tax Credit will be increased in 2023 or if it will be paid out in monthly installments again. However, given the number of lawmakers who have supported a boost to the credit, it is possible that some changes may be made in the future. It is currently unclear what those changes might be.