Child Tax Credit Excluded Income for Housing Purposes

The American Rescue Plan of 2021 (ARP) provides a monthly payment from the enhanced child tax credit and these payments are landing in family bank accounts during the week of July 12, with the first payments arriving on July 15. HUD has determined, in accordance with Federal law, that the monthly child tax credit is to be excluded from the annual income calculation for affordable housing programs.

Section 7527A of the ARP provides a monthly payment of up to $300 per month from July 2021 through December 2021. 26 U.S. Code §6409 states, “notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds.”  Due to the requirements of this law, the child tax credit is excluded income for purposes of any housing utilizing federal benefits or assistance, including the Low-Income Housing Tax Credit program (LIHTC).

Parents of children ages 5 and younger can receive up to $300 per month per child and $250 per month per child ages 6 to 17. The payments max out at $3,600 annually for each child under six and $3,000 for those ages six to 17. The credit is fully refundable, meaning families can still benefit even if they have no earned income or do not owe income taxes.

The expanded credit ends in December, but President Biden has called for a four-year extension, which would need Congressional approval.

In addition to the Child Tax Credit, owners and operators of affordable housing should keep in mind that the Federal Pandemic Unemployment Compensation of $300 per week is also excluded income.

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