Short Answer 
Parents can effectively manage their finances through the Child and Other Dependent Tax Credit by reducing their tax liability, receiving vital financial support, and managing monthly expenses, especially for families with children under six. The credit, especially enhanced by the American Rescue Plan, can alleviate financial burdens and help families allocate resources for essential needs.
Step 1: Reduce Tax Liability
By claiming the Child and Other Dependent Tax Credit, parents can diminish their overall tax liability. This means they may pay less in taxes or receive a larger tax refund. It’s essential for parents to assess their eligibility and calculate the potential savings when filing their taxes.
Step 2: Receive Financial Support
This credit can serve as a vital source of financial support for working families. By alleviating the financial burden associated with raising children, it can play a critical role in adjusting monthly budgets. Families can utilize the savings from the credit to cover essential expenses such as childcare, education, and healthcare.
Step 3: Manage Monthly Expenses
Claiming this credit is particularly beneficial for families with children under the age of 6, especially with the increased credit amount under the American Rescue Plan of $3,600 per child. This added financial support can significantly impact a family’s ability to manage their monthly expenses effectively, allowing them to allocate funds towards savings or other needs.