Child tax credit: What’s the best way you can use it?
It has been months in the making, and it means a big check for a lot of families.
CHARLOTTE, N.C. (WBTV) - Starting today, the first payment for the new expanded child tax credit will be sent out.
It has been months in the making, but there’s still a lot of confusion about how this works.
For every child younger than six years old, families receive up to $300. For children 6 to 17 years old, families receive up to $250.
The exact amount is based on your 2020 tax returns. The full credit is available to married couples who file jointly and make less than $150,000. It is also available to individuals who make less than $75,000.
It means a big check for a lot of families. What’s the best way you can use it? Jamie Boll asked Mark Henry from Alloy Wealth Management.
Mark: It will not last forever. Nothing good does, and so it’s one of those things where you have to put the money to use and use it properly. But it is exciting for the people that are going to get this.
Jamie: Let’s talk about some smart ways that families can use this tax credit. What would be the best use for this money?
Mark: Well, every family is going to be different, so you have to put a plan together for your specific needs. So for a lot of families is going to go toward child care. That could be a big impact to really help pay for the big expensive childcare. Allowing one of the spouses to be able to get out of the house and go back to work. That could be the right place. Or we could look at this - maybe we could use this to pay off high-interest credit card debt. You know how we feel about that over here.
Jamie: Absolutely, and I’m thinking too, you can set aside a little bit, that’s never a bad idea either.
Mark: I say a lot of times we want to fund these other things that just can’t seem to find their way into the spending plan. Well, now we have this extra money. This could kickstart a young person’s savings for college or it’s for trade school. Emergency funds could now finally get there, where you haven’t had the extra money in the spending plan to actually fund an emergency fund. This is extra money coming in for a lot of families and you have to look at your specific needs and put it to use where it’s needed the most.
Jamie: We’ve talked about that before, Mark. You know the alternator goes out on the car. The tires have to go. It’s really hard to just come up with that cash immediately. If you got just that little bit you can put away, it can really ease that burden.
Mark: That’s the whole idea, Jamie. It can make a big difference if we save it and put it [in] the right places, whether it’s a high-interest credit card or emergency fund. It can actually add up and make a big difference in a spending plan. And again, it’s money that you weren’t expecting and it’s coming now.
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