President Joe Biden's Build Back Better plan would extend expanded Child Tax Credit (CTC) monthly payments through 2022 and make these benefits permanently available to low-income families. This has the potential to reduce child poverty by more than 40%, according to a new report by the Consumer Financial Protection Bureau (CFPB).
The vast majority (87%) of this impact is driven by full refundability, which allows low-income families to receive the same amount of CTC as eligible families with higher incomes. Prior to the American Rescue Plan, 27 million children in low-income families received a reduced credit amount or no credit at all.
However, the trillion-dollar Build Back Better spending plan needs to pass through a divided Congress before being signed into law, and moderate Democrats like Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) may not support the bill without significant cuts.
Keep reading to learn more about the expanded Child Tax Credit, including alternative financing options like personal loans. Visit Credible to compare interest rates across multiple lenders at once without impacting your credit score.
Permanent CTC expansion would benefit 4.1 million children
The American Rescue Plan increased the maximum credit to $3,600 per child for those through age 5, and $3,000 for those between the ages of 6 and 17. The full amount begins to phase down for unmarried tax filers making more than $112,500 and married couples making over $150,000. Notably, it also made the credit available for families that lacked earnings or had earnings that were too low.
Build Back Better would extend the American Rescue Plan expansion through next year and make full refundability permanent. This means that low-income families who did not previously qualify for the Child Tax Credit would now be eligible every tax year. Permanent full refundability would lift an estimated 3.6 million American children above the poverty line, the CBPP estimates. If the maximum credit is permanently increased to $3,600 per child, that number would jump to 4.1 million children.
"Making the credit fully available on a permanent basis to families with low incomes would improve children’s lives in the near and long term and benefit society overall, in important ways," according to the report.
Specifically, additional income yields stronger educational performance, better health outcomes and higher incomes in adulthood. Overall, CTC expansions are expected to benefit more than 65 million kids — nearly 90% of all children in America.
Working families who don't qualify for CTC payments but need extra cash can consider borrowing a fixed-rate personal loan. Personal loan rates are near all-time lows, according to the Federal Reserve, and you can see your estimated rate for free on Credible.
BBB would also limit child care spending
In addition to expanding the Child Tax Credit program, Build Back Better would also limit the amount that most Americans pay for child care to 7% of their income. Currently, families typically spend about 13% of their income on child care, Treasury Secretary Janet Yellen told NPR's Marketplace.
"This will help the Americans, particularly women, to work, to boost labor force participation and growth, and it will provide better resources for children growing up," Yellen said.
The high cost of child care is enough to keep many single parents out of the labor market. About 1 in 6 (16%) of low-income families have been spending their monthly Child Tax Credit payments on child care.
What to do if CTC payments aren't extended
Under Build Back Better, families could receive advance Child Tax Credit payments of $300 per child under 6 and $250 per child ages 6-17 via Direct Deposit for the entirety of 2022. But if lawmakers can't agree on expanding advance payments, families will need to find other ways to afford these necessities. Here are a few government programs available to low-income families:
- Short-term emergency assistance. Temporary Assistance for Needy Families (TANF) offers state-administered programs to help pay for child care and job preparation.
- Food and nutrition assistance. The Supplemental Nutritional Assistance Program (SNAP) provides financial aid in the form of Electronic Benefits Transfer (EBT) cards that can be used to buy groceries.
- Housing assistance. The Department of Housing (HUD) offers rental assistance, housing vouchers and low-cost rentals through Public Housing.
If you don't meet the eligibility requirements for these programs but still need extra cash to make ends meet, consider borrowing a lump-sum personal loan. You can see your offers for free on Credible's online marketplace. Then, use a personal loan calculator to estimate your monthly payments.
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