Before 2021, the child tax credit was worth up to $ 2,000 per child, of which only $ 1,400 was refundable. And to receive the credit, parents had to file an income tax return and wait for their money to be paid out as a refund.
This year, the child tax credit received a huge, albeit temporary, boost thanks to the US bailout, the massive COVID-19 relief bill enacted in mid-March. For the 2021 tax year, the credit is now worth up to $ 3,600 for children under 6 and up to $ 3,000 for those aged 6 to 17. And the credit is now fully refundable, so if a family owes the IRS no tax, they can still get it back in full.
Equally important, this year half of the child tax credit is paid out in monthly installments, the first of which came out in July and the last of which is expected to hit bank accounts in December. The balance of the loan will be paid in 2022.
So far, the enhanced credit has helped more than 3 million families experience less food insecurity, and it has helped countless households consolidate their finances. And now, new data shows that improved credit may also help more parents return to work.
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Earning a salary again
Many parents have been forced to reduce their working hours or even take a complete career break during the pandemic. During much of the outbreak, schools were not open for full-time in-person learning, and in the absence of day care, many parents had no other choice. than staying at home and looking after their children.
Today, researchers at the University of Washington in St. Louis, Appalachian State, UNC-Greensboro, the Urban Institute and Humanity Forward found that 94% of parents plan to continue to work or even to work more hours thanks to the money they have. receive boosted credit. Only just over 6% of those polled said that credit would encourage them to work less or change jobs.
Considering the cost of child care these days, that makes a lot of sense. For many parents, it is not economically feasible to work full time because too much of their income would be spent on child care expenses. This is especially true for low incomes.
While child care costs have risen steadily in recent years, the minimum wage has remained stable at $ 7.25 an hour since 2009. So it’s easy to see why some parents might need the extra money for be able to keep a job.
A temporary measure that could become permanent
The fact that the strengthened child tax credit could encourage more parents to return to work could fuel the argument for keeping the improved version beyond 2021. In fact, some lawmakers are already fighting to make the extended version, citing that doing so could significantly reduce child poverty rates. And now, those in favor of keeping credit strong may be able to point to an increase in labor market participation as another reason to take this route.
That said, there is debate among lawmakers as to whether parents should be forced to work to receive the child tax credit. Senator Joe Manchin, for example, argued that parents should be required to have earned income to remain eligible.
But however this debate unfolds, there is a clear benefit to keeping the soft credit in place for future tax years. Not only could this help more parents increase their working hours, it could also boost entrepreneurship. And that could, in turn, lead to more jobs and a faster recovery from the pandemic.