Theincreases the existing child tax credit, or CTC, to $ 3,600 per child under 6 years old and $ 3,000 per child (up to 17 years old) per year. Along with increasing the dollar amount, the plan would let families receive the money on a monthly basis instead of annually And the bill would work to ensure that lower-income families receive the payments. This increase in the CTC would reduce child poverty by 40%, according to a report from the Center for Budget and Policy Priorities.
At a basic level, the CTC is a credit that parents can claim to help them reducedepending on the number and age of their family members. For many, it can be a much needed source of relief as part of a diet Here’s everything you need to know about the CTC, including eligibility requirements for you and your kids, how much it’s worth, and Congress’s future plans to improve it.
What is the child discount and how does it work?
The CTC is currently a $ 2,000 credit that parents can claim on their taxes for any child under the age of 17 (same age bracket forwhen it comes to the first and second And if that credit is greater than the amount of parents can still receive up to $ 1,400 of the balance as a refund; this is technically referred to as the “child supplemental discount” or refundable CTC. For example, a married couple with children ages 5, 10, and 12 would receive a total child discount of $ 6,000 unless they have , in which case they would receive $ 4,200.
Families with older children are also eligible: You can claim $ 500 for each child ages 17-18, or full-time students between the ages of 19 and 24.
Note that although the admission requirements are relatively broad, higher income families may receive lower credit. But married couples filing jointly with an Adjusted Gross Income (AGI) of less than $ 400,000 are eligible for the full amount, as are individuals with an adjusted gross income (AGI) of less than $ 400,000.under $ 200,000.
How does the new deduction invoice change the child discount?
Theworking its way through Congress would expand the tax credit so that:
- Families with children 17 and under would receive a $ 3,000 credit.
- Those with children under the age of 6 would receive a credit of $ 3,600.
The credit would be fully repayable, removing both the dollar limit and the income limit that currently prevent many low-income families with children from receiving the full credit, according to the Center for Budget and Policy Priorities.
The size of the credit would start to decline for single people making more than $ 75,000 a year, and for married couples making more than $ 150,000 a year. If approved, payments would be sent monthly over the course of a year, starting in July. (Democrats are working to make sure that the monthly payments meet the requirements to be included in the bill.)
The bill would also expand other child-related credits, so families could claim up to half of their childcare costs on their taxes.
For the bottom 20% of families in terms of income, the proposed extension of the CTC would increase income by an average of 9.7% – even higher if you only consider tax returns with children, according to the Institute on Taxation and Economic Policy . The proposal would also lift 4.1 million children above the poverty line, reducing the number of children in poverty by more than 40%, the Center for Budget and Policy Priorities said.
Who wants to extend the child discount?
Politicians from both sides have expressed support for the expansion of the CTC.
On February 4, Utah Senator Mitt Romney, a Republican, unveiled his own proposal, which would bring in $ 4,200 per year for each child up to age 6, as well as $ 3,000 per year for each child aged 6 to 17.
Then, on February 8, Democratic representatives Rosa De Lauro of Connecticut, Suzan DelBene of Washington and Ritchie Torres of New York reintroduced the American Family Act. The proposed legislation would to trade similar to Biden’s plan by offering a monthly fee for children – $ 300 for a child under 6 years old and $ 250 for a child between six and 17 years old.
Why does this tax credit receive so much support? Generally, because when taxes are paid back to families, they usually spend them. Those economic expenditures are expected to reinforce economic activity.
“Getting money into the hands of lower-income people is a long-standing, time-honored approach to boosting the economy,” said Mark Mazur, director of the Urban-Brookings Tax Policy Center.
Republicans first proposed the CTC in 1997 as part of the Taxpayer Relief Act. And it was Senator Marco Rubio, a Florida Republican, who headed the 2017 Tax Cuts and Jobs Act that doubled the credit from $ 1,000 to the current amount. Democratic support for a tax credit created by Republicans makes a two-pronged plan to expand the credit more likely.