Enhanced Child Tax Credit 4-Month Checkup: How Are Families Spending it?

When the American Rescue Plan was approved down party lines and signed into law by President Biden earlier this year, one of the most intriguing parts of it was the enhanced Child Tax Credit that came with it.

As a refresher, eligible families are able to receive up to $1,000 more for children between the ages of 5 and 17 and up to $1,600 more for children five and under. This brings the total 2021 tax credit from $2,000 per eligible child to $3,000 and $3,600, respectively. What’s more is that families can elect to have some of this credit paid to them monthly, up to $300 per month, which began in July. The remaining amount that is not paid monthly can be claimed when filing 2021 calendar year taxes.

The thinking behind the enhanced credit and monthly payments is that it would give families money that they need now – and not have to wait for it after filing their taxes early next year. Many supporters believe that it will also be able to halve the number of children who are living in poverty. And based on recent data from the Census Bureau, it appears that the program is working as planned.

In this post, we’ll take a closer look at where families are spending the money they’re getting as part of this enhanced program and what the future of the program could be. Here’s a look:

Where are Families Spending the Child Tax Credit?

So where are families spending this money from the enhanced Child Tax Credit? Here’s a look at the leading categories where families spent some – if not all – of their additional money:

• Nearly 60 percent spent it on food.
• About 33 percent spent it on utilities.
• More than 30 percent spent it on school transportation.
• Another 30 percent spent it on clothing and accessories.
• About 20 percent spent it paying down debt.
• About 18 percent spent it on rent.
• About 17 percent spent saved or invested it.
• More than 16 percent spent it on school supplies.
• About 15 percent spent it on car payments.
• About 12 percent spent it on child care costs.

What’s more is that most experts say that the aforementioned numbers are actually likely reporting out lower than what they truly are. That’s largely because underreporting is fairly common in reports such as this.

What’s the Future of the Enhanced Child Tax Credit?

So what’s the future of the enhanced child tax credit? While the hope was that it would extend as part of a major spending bill Democrats would pass through Congress and advance to President Biden’s desk, that appears murky. While the initial hope was that it would be extended for an additional 5 years, a safer bet is that it will be extended for one more year to start. Again, that’s all contingent on lawmakers – and negotiations are ongoing.