What is the child tax credit and how does it work? - Yahoo News

Yahoo Finance's Alexis Christoforous explains everything you need to know about the child tax credit.

Video Transcript

JULIE HYMAN: And also we should mention that the passage of that bill, the bill includes an enhanced child tax credit. As it goes to the Senate, let's talk about what exactly that means. What is an enhanced child tax credit program? Our Alexis Christoforous takes a look.

ALEXIS CHRISTOFOROUS: It's no secret-- kids can be expensive. To soften the blow, there's the child tax credit, a chunk of money from the US government to help families pay for their kids.

- Wait, the government pays you to have me?

ALEXIS CHRISTOFOROUS: Well, not exactly, but kind of. The child tax credit has been around since 1997, but it's a lot more generous this year because of the pandemic. Here are the numbers for 2021. Depending on a family's income, the maximum tax credit for children under six is $3,600. For kids 6 to 17, it's $3,000.

- Wait, I'm not worth as much as a baby?

ALEXIS CHRISTOFOROUS: The 2021 child tax credit is fully refundable. What does that mean? If your child tax credit is more than what you owe in income tax, you get every single dollar difference in cold, hard cash as a refund.

- What if we need the money now?

ALEXIS CHRISTOFOROUS: This year, families can get half of the child tax credit up front. Millions are already receiving that money in monthly payments. But don't worry, you can still claim the full credit by filing your taxes in 2022.

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