President Biden’s new American Rescue Plan introduces a wide variety of Covid-19 relief expansions, including an extended child tax credit. This bill makes interesting adjustments to the child tax credit program that is currently implemented in an effort to, according to President Biden, “give families who are struggling the most the help and the breathing room they need to get through this moment.”
This proposed credit grants an annual $3,000 per child ages six to 17 or an annual $3,600 per child under six years old. If this bill is passed, families could start receiving monthly payments of $250 from the IRS for school-aged children by this July. Additionally, families could receive about half of their total child tax credit this year and then claim the remaining amount on their 2021 tax returns.
The proposed credit expansion is income-based:
- Eligible families include individuals with a yearly income of $75,000 or less and joint filers with a yearly income of $150,000 or less.
- The credit is then reduced by $50 for every $1,000 of additional adjusted gross income.
- The credit is capped at individuals with a yearly income of $95,000 or more and joint filers with a yearly income of $170,000 or more.
- However, taxpayers who are ineligible but still make less than $200,000 individually or a joint $400,000 can still claim the original $2,000 per child credit.
Another change that this bill proposes to the program is that the credit becomes fully refundable. Under the current policy, taxpayers could only get up to a $1,400 refund if their credits exceeded the taxes they owed. If this plan is approved by the House this week, taxpayers could get the full $3,000 or $3,600 refunded. Additionally, parents do not need to be employed to be granted this credit and the proposed policy expands to US territories. Hopefully, through the passage of this bill, families who have been facing pandemic-related financial hardships could get some relief.