As the second monthly child tax credit checks hit Virginia families’ bank accounts on Friday, parents report using the money for everything from food and school supplies to rent and child care.
Andrea Leggett is using the child tax credit to help send her 4-year-old twins to preschool in Henrico County in the mornings. Typically, one year of preschool in the mornings costs $6,000, but with twins, the cost doubles to $12,000.
Without the child tax credit, Leggett, who works part time, and her husband, who works full time as a security guard, would have put the school fees on credit cards. With the child care tax credit, Leggett’s $1,200-a-month preschool bill is now $600.
“Most of my friends have children this age. And every single one of them is using this for child care,” Leggett said. “It’s relieving a lot of the burden on the family.”
Starting in July, about 35 million eligible families began receiving the child tax credit. The monthly payments amount to $300 for each child who is 5 and younger and $250 for those between 5 and 17. The expanded child tax credit is part of President Joe Biden’s $1.9 trillion coronavirus relief package that passed in March.
The plan increased the child tax credit to a total of $3,600 per child under the age of 6 and $3,000 per child ages 6 to 17. The previous tax credit per child was $2,000. The money also arrives in monthly installments, instead of a lump sum, which will be paid from July 15 through Dec. 15.
“This would be the largest-ever one-year decrease in child poverty in the history of the United States of America,” the president said on July 15 when the tax credit started to arrive in families’ bank accounts. “Millions of children and their families, starting today, their lives are about to change for the better. And our country would be better off for it as well.”
For starters, the child tax credit is reaching more families than ever before.
“The biggest thing we’re seeing is that it expands to folks that previously wouldn’t have qualified because their incomes were too low,” said Allison Johnson, a spokesperson for family advocacy group ParentsTogether Action.
Before, only people who earned enough money to owe income taxes could qualify for a child tax credit. But now the tax credit is expanded to non-filers as well.
“It’s making such a big impact on the child poverty level and reaching families who were missing out on receiving the benefit,” Johnson said.
Plus, the monthly installments help families pay for child-related expenses on a monthly basis.
“Families have ongoing needs for their household budgets. Costs recur throughout the year for food and groceries and child care,” said Chris Wodicka, a senior policy analyst for the Commonwealth Institute for Fiscal Analysis.
The U.S. Census Bureau released a report last week linking the first round of check disbursements to a reduction in food insecurity. In Virginia, the data shows a drop in families that have kids and are struggling to put food on the table, with food insecurity falling 1.5% — from 6.1% to 4.8%.
To qualify, married couples filing jointly who earn up to $150,000 get the full amount of the tax credit, as well as a person filing as head of household who makes $112,500, or a single filer who makes $75,000.
“Families need to have ongoing income support through the year and not just at tax time,” Wodicka added. “This is a shift from how the system worked up until now and will require an adjustment period.”
LaKeisha Williams works two jobs and has four children ages 14, 10, 7 and 5 on Richmond’s South Side. She will be using the child tax credit to pay for health documents and medical bills.
Her 5-year-old has asthma; when a bad case of bronchitis landed him in the hospital, Williams was left with a $2,300 medical bill.
“In talking to families, there’s this real sense of relief at how much this could help, said Johnson with ParentsTogether. “For a family with several kids, it can be a real game changer in terms of affording rent or a different housing situation that suits their needs. Or hiring a tutor for their kids who may have struggled during the pandemic. Or saving for college.”
Some families with four kids, for example, could receive up to $1,200 a month with the expanded child tax credit.
Shaneka Charles said she’ll be using the child tax credit to send her 1½-year-old daughter, Iyla, to child care while she returns to work in the nutrition department with Richmond Public Schools.
“I can’t believe how expensive it is,” she said. “Some of the programs I’m looking at cost $230 per week. And then I have to buy her supplies for preschool.”
In Virginia, the average annual cost to have a baby in day care is more than $14,500, according to Child Care Aware of America. For older children up to age 4, the cost is around $11,500, accounting for up to 47% of a typical single parent’s income.
Kelsey Young recently moved to Glen Allen with her husband and 2-year-old. She’s using the child tax credit for a babysitter for a few hours every week so that she can look for a job.
“We couldn’t have afforded it without the credit,” Young said.
According to a new survey of 1,200 parents from ParentsTogether, 90% of parents surveyed said the payment of the child tax credit was helpful or made a “huge difference” to their family’s economic security; 48% said they spent it on food, 45% spent it on utilities, 29% spent it on rent, and 13% spent it on child care costs; 56% of parents said receiving just the first round of checks made them feel less anxious about their finances.
But some parents are worried about not receiving a larger tax return in the spring. Some of those parents decided to opt out of the monthly installments.
There is also concern that some of the lowest-income families will not be receiving the credit if they have not filed taxes in the past two years.
While non-filers can sign up for monthly payments at irs.gov, the Center on Budget and Policy Priorities estimates that 4 million or more children are not automatically receiving the credit.
Identity verification is the largest barrier for many non-filers, according to Emily Griffey, chief policy officer for Voices for Virginia’s Children, typically because they lack access to a phone that can receive text messages or they lack a credit history.
According to Treasury Department data, the July 15 payments were sent to 1.5 million children in Virginia. These families received an average payment of $412 last month, for a total influx of $377.5 million into Virginia communities.
The remaining second half of the credit will conclude with a lump sum paid out during the tax season. Non-filers will still need to file a 2021 tax return in order to claim the other half of their credit.
The new child tax credit is only for 2021. An extension of the child tax credit is included in Biden’s American Families Plan, which has not yet been passed.
“Families are just coming out of the pandemic,” Wodicka said. “This is a critical piece of support for them.”