How does the American Rescue Plan affect the Child Tax Credit?

The American Rescue Plan significantly enhanced the Child Tax Credit during the year 2021. One of the most impactful changes was that it temporarily increased the credit amount for qualifying families. Additionally, the legislation made the credit fully refundable for that year, meaning that families could receive the full benefit of the credit, even if they had no tax liability. This move aimed to provide more financial relief to families, particularly during the ongoing effects of the COVID-19 pandemic.

The full refundability aspect means that families could receive the credit as cash payments, which is particularly beneficial for low-income households. By increasing the total credit amount and ensuring it was fully refundable, the American Rescue Plan aimed to reduce child poverty and offer substantial support to families with children. Thus, the correct answer highlights both the increase in the amount and the change to full refundability, making it a critical measure for economic relief during that period.