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Expanded child tax credit a relief for Iowa families

Expanded child tax credit a relief for Iowa families

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Tanya Street and her daughter, Carly Burgess, 17, are photographed at the Rink at Coral Ridge Mall in Coralville on July 19. Street will benefit from the child tax credit, which was included in the Biden administration's American Rescue Plan Act of 2021. Parents will receive an advance monthly payment of $300 by direct deposit from July 15 through Dec. 15.

It’s been a tough year for Tanya Street.

As a self-employed Cedar Rapids resident who teaches ice skating, the 45-year-old was unable to work as the novel coronavirus shut down business throughout most of 2020.

And then the derecho hit in August, severely damaging the ImOn Ice Arena and further hindering Street’s means to earn an income.

Each week she wondered whether she would be able to pay her bills and provide for her 17-year-old daughter, Carly Burgess.

“I’m stuck between a rock and a hard place. Sometimes I just don’t know if I’m going to be able to make a payment or not,” she said.

But Street, along with millions of other families across the nation, have found some relief from new advanced child tax credit payments that went into effect this month.

“I’m still dealing with financial ramifications from everything that happened last year. When heard about child tax credit, I was relieved because things are very tight,” Street said.

The $1.9 trillion American Rescue Plan, passed by Congress in March, includes a $100 billion temporary expansion of the child tax credit program that will benefit more than more than 36 million families — representing about 60 million children across the United States.

Starting in July, half the annual credit will be distributed in advance on a monthly basis until December. The other half will be available after filing 2022 taxes.

Under the new program, families can receive $3,000 per child aged six to 17, or about $250 per month per child. Families will receive $3,600 per child under the age of six, or $300 per month per child.

If a child turns 18 in 2021, he or she is not eligible to receive monthly payments.

The credit is available to single parents making up to $75,000 a year, single head-of-household filers making up to $112,500 a year, and couples filing jointly making up to $150,000 a year.

Monthly checks from the Internal Revenue Service began arriving July 15.

The expanded child tax credit will benefit about 669,000 children in Iowa, according to the Center on Budget and Policy Priorities, a nonpartisan research institute. That means 93% of children under the age of 18 in the state could benefit from this expansion.

Of those children, the majority — 78% — are white. Ten% are Latino, 4% are Black, 2% are Asian and 5% identify as other or multiple races, the analysis concluded.

The expansion also means an additional 27 million children will receive the tax credit. Families who didn’t earn enough money and didn’t owe income taxes previously could not receive the full tax credit.

In Iowa, 198,000 children who weren’t eligible under the previous credit program now can receive these monthly payments, according to the Center on Budget and Policy Priorities.

This move could be transformative for some families nationwide, particularly some of the poorest Americans. This program is expected to cut child poverty in the United States in half, according to an analysis from the Center on Poverty and Social Policy at Columbia University.

Iowa could see nearly a 40% drop in child poverty, the center said.

In 2019, about 7% of Iowa families lived below the poverty line, which is currently $26,500 for a family of four.

But experts warn this advance tax credit is just that, and does not operate the same way as a stimulus payment. The monthly payments are families’ estimated child tax credits for 2021, and are based on 2020 or 2019 income and household size.

So if their income or household size changes, families could end up receiving smaller refunds than expected, or owe on their taxes next spring.

“People may have to pay back a portion of their taxes. It could be a problem for people around that $150,000 or $75,000 range,” said Noah Schmall, a lawyer at Lynch Dallas law firm in Cedar Rapids.

Eligible families can opt out of the monthly payments and instead receive them as a lump sum with their 2022 taxes instead.

To manage their payments and more information on the child tax credit, Schmall said families should visit the IRS website,

Schmall said families also can speak with an accountant or lawyer to determine if this could be a challenge for them.

The Biden Administration and Democrats in Congress have pushed to make the credit permanent. However, it’s unclear whether President Joe Biden’s American Families Plan — which bolsters aid for families, women and children — will be passed by Congress.

‘That little extra’

When Street’s first check from the IRS arrived, she planned to fill up her car with gas so she could continue commuting to Coralville to teach ice skating lessons at the ice rink in the Coral Ridge Mall.

Her business has picked up in recent weeks as the COVID-19 vaccines have become more widely available, but Street said her income still is falling below her typical rate before the pandemic.

Because of that, she expects her child tax credit will go toward bills. But she’s hopeful this will help her do more than just scrape by.

Maybe she’ll even be able to take her daughter out to eat for the first time in several months, she said.

“Although it’s not 100% peace of mind, just having that little extra each month is going to give me a little more flexibility, and that’s huge,” Street said.

So far, she has been able to get by with the help of food and rental assistance. Stimulus checks went directly to pay for bills, she said.

“The last year has been tough, and I’ve had to deal with the majority of it on my own,” Street said. “Staying afloat has been a huge stress.

“I’m just grateful (Congress) passed something for us to help us get by.”


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