It felt like Christmas in July for more than 35 million American families this week, when they began receiving a collective $15 billion in their bank accounts in the form of expanded child tax credits.
The vast majority of parents who qualify for the credit woke up on July 15 to $250-300 per child directly deposited into their bank accounts, and can expect to receive the same amount monthly for the next six months. The reformed credit is one of the largest anti-poverty initiatives the federal government has undertaken since former President Lyndon B. Johnson launched his war on poverty in 1964—reaching roughly 90% of U.S. families with children.
A form of this benefit has been around since 1997, but this year’s version is radically different than past iterations, meaning more money in more families’ pockets. Previously, families were awarded a maximum of $2,000 per child ages 0-16 in a lump sum at tax return time. Families who owed little or no income tax could only receive up to $1,400 per child, leaving more than 26 million kids ineligible for the full credit because their families’ earnings were too low. Now, families will be awarded up to $3,600 per child under age six this year, and up to $3,000 per child between the ages of six to 17.
The fully expanded form of this year’s credit begins to to phase out for heads of household earning up to $112,500 per year and joint filers earning up to $150,000. Families making up to $400,000 will still receive the original tax credit amount in a monthly form, equaling at least as much as the credit they have received in previous years at tax time, with it phasing out for incomes above that.
For the first time, the credit is fully refundable—meaning the poorest families who most need the cash will get the full benefit. But the most significant change most parents will notice is that they don’t have to wait until tax return time to receive the funds. The first half of the credit can be divided into six monthly payments between July and December, with the second half distributed at tax return time. Columbia University’s Center on Poverty and Social Policy estimates that these changes, in combination with other components of the American Rescue Plan that President Joe Biden signed into law in March, will lift as many as 5 million children out of poverty, cutting the U.S. child poverty rate in half.
But there’s a catch: The expanded tax credit is only funded for 2021. Democratic members of the Senate Budget Committee recently announced an agreement to spend $3.5 trillion on an infrastructure plan that reportedly includes funding these expanded tax credits through 2025, but that would require all 50 Democratic Senators voting for the package, unless Republicans sign on. Though 65% of voters across the political spectrum supported raising the child tax credit, according to a March poll from the left-leaning think tank Center for American Progress, zero Republicans in either chamber of Congress voted for the American Rescue Plan, which included the current child tax credit expansion. Republicans have cited the price tag—over $100 billion—and the fact that people who earn no income will be eligible for the credit as reasons for not backing it.
With the future of the larger, monthly child tax credits in flux, here’s how seven parents plan to spend their first installments of the funds.
Married mom of two needs sneakers for her 9-year-old
For Sarah Heflin’s family, the expanded child tax credit couldn’t have come at a better time.
Her family’s income went down by two-thirds in March 2020, when she was laid off from her job as an e-commerce manager Atlanta due to COVID-19. At first, her family managed on a combination of unemployment, her wife’s pest control job salary, and occasional freelance work that allowed Heflin to stay home with her 9- and 14-year-old children attending school virtually. However, when Georgia Gov. Brian Kemp ended the state’s expanded unemployment benefits in May, Heflin was stuck: Businesses were hiring, but many were only offering minimum wage. “I can’t get a job working minimum wage—even though they are plentiful right now—and have childcare,” she says. “My babysitter was paid more hourly than that.”
Since her 9-year-old son is too young to be vaccinated, Heflin, 39, has been anxious about sending him back to in-person school. Georgia’s vaccination rate ranks in the bottom third of U.S. states, and the state has never enforced a mask mandate. “I can’t risk losing my son, because we’re tired of COVID and are pretending that it’s not happening. But if he’s home, how can I go out and get any kind of job?” she says. “There’s no winning. I’m either risking our financial security, or my baby.”
She knows the expanded child tax credit won’t entirely make up for the salary she’s missing out on to be home with her children, but it will help ease the stress she felt when she realized her son’s “big hobbit feet” were outgrowing his sneakers. “His feet are so big, he wears man-sized shoes,” she says. “They’re more expensive than kid shoes.” This month, some of the funds will go towards a new pair of sneakers for him.
Single immigrant mother of autistic sons wants a financial buffer
As a single mother, Chioma Oruh has long been the caregiver for her two sons, ages 8 and 10. But when COVID-19 took her father’s life last year, she became the primary caregiver for her mother, too. That has caused financial stress for Oruh, who lives in Washington, D.C. and makes her living as a family-centric parent coach and business consultant, while also giving back to her community by facilitating community baby showers for neurodiverse families of color. The child tax credit will “take the edge off a very tight monthly budget that we live on in an extremely expensive city,” says Oruh, an African immigrant.
Her expenses are compounded by the needs of her sons, both of whom are autistic and require regular therapies. “Those things are kind of already accounted for,” she says, “but what this does is it allows for a cushion that buffers bread and butter things like groceries, utilities, and [items] that my household and the other households that I support that don’t have children need.”
Chicago mom of five seeks another income stream
Because raising five children as a single mother in Chicago is pricey, Alexus Renée is always looking for her next side hustle. Though she primarily works in the transportation sector, she also founded a media outlet covering celebrities, entertainment, beauty, fashion, and sports that generates advertising revenue. “I’m always trying to figure out ways on how I can create some residual income, with so many children and taking care of them by myself, so every little bit extra that I get is such a big help,” says Renée, 40.
She plans to take the money she receives from the expanded child tax credit and put it towards something that can earn her even more cash to pay her monthly bills. She’s decided to purchase a car to list on Turo, a car-rental platform akin to an Airbnb for vehicles. Because she’s also saved money from the stimulus checks she received during the pandemic, she expects she’ll be able to purchase her first car to list on Turo in the next month or two.
That way, extra funds will keep coming in—even if the expanded child tax credit goes away. “You might not get this money for forever. The best thing to do is take it and use it for something helpful,” she says. “Things change all the time. I just don’t want to depend on it.”
Wine seller aims to offset cost of childcare
The cost of daycare is more expensive than public college tuition in at least 28 states—including Massachusetts, where Lauren Trivellini lives with her husband and two children under the age of five. Trivellini, 40, works in sales for a wine importer, and her husband works a full-time job, a part-time job, and attends graduate school. Though they have multiple sources of income, the costs of childcare are still a burden.
Trivellini is happy with her children’s daycare facility—which is top-ranked in her area—and its employees, but the service doesn’t come cheap. “I don’t want them to be paid less. I don’t want them to not have health care benefits. They do a wonderful job taking care of our children,” she says. “But it’s a huge expense for us. It’s bigger than our mortgage.”
She’s grateful the expanded child tax credit will benefit middle-class families like hers, who often make too much money to qualify for other government programs. “Families of our income level really get squeezed in a lot of ways. You look at the salaries on paper, and it might seem high. But then when you deduct health care premiums for the year, money we set aside into HSA and FSA accounts, money we have to save for our own private retirement accounts, money we need to save for the girls’ college, and money we have to pay for childcare, how expensive housing is—when you start to actually look at all of those items, the salaries are not so high,” she says.
A family that didn’t expect to be eligible will invest in son’s college fund
Alyssa Kaplan knew about the monthly child tax credit, but she didn’t think families like hers would be eligible. Her husband makes a “comfortable living” as a doctor, she says, and monthly expenses are not a concern. So when she saw a letter in the mail indicating her New Jersey family would receive a partial child tax credit for her 10-year-old son a few days ago, she was pleasantly surprised. “We’ve always paid our taxes, we’ve always done what we’re supposed to do,” Kaplan says. “So I feel I’m getting a little something for what I’m paying.”
She says she’s most grateful that the credit exists to help lower-income families “hopefully get their kids out of poverty,” but since her family has its basic needs covered, the unexpected credit will go toward her son’s college savings account. “If he decides he wants to go to a more expensive school, then there will be less of this feeling of, ‘We can’t afford it. We have to work harder. And instead of retiring, we have to work extra in order to be able to afford it.’”
Wealthy dad will donate the money to charity
A Portland, Oregon couple is doing something surprising with the money: giving it all away. Collectively, the husband and wife pair bring in about $400,000 per year in the tech industry. “The letter we received last week says we are supposed to be getting approximately $350 per month, which I recognize is a reduced benefit due to our earnings, but still unnecessary,” says the father, who asked to remain anonymous because he was not seeking attention for his donations. Each month, the family will donate the money from their credit to a charity in their city that fights child poverty.
The father says he wishes the government would lower the cap to concentrate the credit on lower-income families. “Great programs like this need to be highlighted as a good that the government can do for people, but I worry that households like mine receiving the benefit dilutes the argument of the good being done to the millions of households who desperately need it,” he says. “I would prefer they increase the benefit for struggling families [and] lower the income limit.”
Minnesota mom will use credit to offset rising rent and stagnant wages
49-year-old Jenna Fulford of St. Paul, Minnesota is getting buried in rising costs of living and sluggish earnings. She says her salary as a mental health provider—she goes into clients’ homes to help them get out into the community, make their health appointments, and meet daily living goals—hasn’t risen in three years, while her rent has gone up nearly every year for 17 years. “I’m not in my job to just get a paycheck. I’m in it because I’m an empathetic woman, and I care about people that have mental health issues,” says Fulford, who has two adult children and a 14-year-old. “But it’s getting hard when wages are staying the same, and there’s inflation with rent, there’s inflation with food. It’s just not adding up anymore. I’m literally living paycheck to paycheck.”
The tax credit will help her keep a roof over her head. But it will help some of her mental health clients—some of whom didn’t earn enough to qualify for previous versions of the full credit—even more. “A lot of my clients are the ones that are even poorer,” she says. “They can actually live and not be in a panic and worry every single day: ‘What am I going to eat?’”
Though the funds hit her account on July 15th, her anxieties haven’t completely subsided. The expanded credit might not last beyond this year. “After you’ve given us this, it’s like waving a candy bar in a dog’s face,” she says. “It’s almost like a tease, if you’re gonna get us dependent on it, and then take it away.”
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