The Check is in the Mail
Child Tax Credit Changes Yield Tax Relief to Rural Families
by Beth Docteur
As a volunteer with the AARP Tax-Aide service in rural Page County, Virginia, I have seen first hand the important role of tax credits in helping families with the costs of raising children. Many clients who use the free tax preparation service rely on their annual federal income tax refunds–including refundable credits for which they are eligible–to supplement their household budgets and finance purchases that exceed the reach of families living paycheck to paycheck.
The Child Tax Credit (CTC), created in 1998, reduces the federal income tax bills of households with dependent children, leaving them with more of their earnings to put toward family needs. The American Rescue Plan Act, signed by President Biden in March of 2021, modified the CTC to give families more tax relief and put that relief on an accelerated timetable. For tax year 2021, the plan increased the amount of the credit from $2,000 to $3,000 per child and to $3,600 for children under six years of age, while expanding eligibility to include 17-year old children. Eligible families will get checks of between $250-$300 per child, beginning on Thursday, July 15 and continuing monthly for the rest of the year, then see the remainder as a refundable tax credit when they file their returns.
The Rescue Plan made the CTC even more valuable to rural families by making the full amount available to households with low earnings and those without earnings in 2021. Previously, half of all children living in rural areas were penalized with a reduced credit because their families had earnings too low to qualify for the full amount. As many as 198,000 children living in rural parts of Virginia will benefit from the enhanced tax benefit this year.
Expansion of the CTC helps not only families with children, but also provides indirect assistance to rural businesses and landlords who rely on spending by local families for their own earnings and income. While the monthly checks may be used in different ways depending on family needs and circumstances, they are likely to offer a boost to consumer spending, personal savings and economic growth. Importantly, the CTC provisions are expected to reduce the number of children living in poverty this year by 4.1 million, a 40 percent reduction in the child poverty rate.
While the changes to the CTC are restricted to this pandemic recovery year, many advocates and experts have called for an extension of these provisions, a proposal which has the support of President Biden. Rural Americans should ensure that their representatives in Congress take their interests and views into account when voting on these significant changes.
Beth Docteur is consultant in health policy who works remotely from Stanley and Alexandria. Before coming home to Virginia, Docteur was the deputy head of health care policy at the Organisation for Economic Co-operation and Development (OECD).
