The child tax credit, based on parents’ income and number of dependent children, changed significantly this year after the American Rescue Plan Act passed, increasing access and refund amounts for qualifying families. In April, the White House proposed the American Families Act, which would make that change permanent.
A new report from USAFacts breaks down how the child tax works, and which states are benefitting the most.
The child tax credit was originally set at $500 per child in 1998, raised to $1,000 in 2001 and capped at $1,400 in 2017. It was a nonrefundable credit, meaning that rather than receiving a check for the cash amount, families had the money applied directly to the amount they owed in federal taxes.
This meant upper and middle class families got the most benefit out of the credit, as lower-income families often didn’t pay enough in federal taxes to receive the full value of the refund.
The American Rescue Plan Act raised the eligibility age from 16 to 17, increased the credit to $3,000 for every child older than six, and provided $3,600 per younger child. The credit was also made fully refundable, and income requirements were removed, allowing low-income families to benefit from the program.
The new credits began being distributed monthly in July. In August, Utah saw the greatest direct average child tax advance payments at $515. Idaho and South Dakota were the next highest, at $488 and $480 respectively. The District of Columbia received the lowest average payment at $383, followed by Massachusetts and Connecticut at $387 and $395.
