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A new child discount could yield more money than the incentive check. What to know



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Families in need of money will soon be able to get help.

CNET

New incentive checks in front of up to $ 1,400 per person are coming, but there may be other provisions in the $ 1.9 Trillion COVID-19 Emergency that help support Americans during the month-to-month period pandemic, including $ 400 in unemployment bonuses and a new way of handling the child discount to provide families with money faster.

The last iteration of the bill increases the existing CTC to $ 3,600 per child under 6 years old and $ 3,000 per child under 17 years old. The plan not only brings in more money, but also allows families to receive the money monthly instead of waiting for the next tax season. 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 reduce tax assessmentdepending 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 Tax year 2020 refundHere’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 a $ 2000 credit that parents can claim on their taxes for any child under the age of 17 (same age bracket for dependent children when it comes to the first and second stimulus controlsAnd if that credit is greater than the amount of taxes that a family actually owesparents 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 do a refund, 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 adjusted gross income of less than $ 400,000 are eligible for the full amount, as are individuals with an AGI under $ 200,000.

How does Biden’s deduction invoice change children’s tax credit?

Biden’s American Rescue Plan (PDF) called on lawmakers to expand the CTC. The proposal that House Democrats plan to release says that families with children 17 and under would receive a $ 3,000 credit, while families with children under the age of 6 would receive a $ 3,600 credit. It also makes the credit fully refundable, 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 singles earning more than $ 75,000 a year, and married couples earning more than $ 150,000 a year. If approved, payments would be sent monthly over the course of a year, starting in July.

Biden’s original plan also called for families to get childcare credit. A family with one child can receive up to $ 4,000 in total, and a family with two more children can receive $ 8,000. This tax credit would be paid back and available to families earning less than $ 125,000 per year. A family with an income of $ 125,000 to $ 400,000 will receive partial credit, although details of how much have yet to be announced.

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.

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If the child discount is extended, you can get a check monthly for one year.

Sarah Tew / CNET

Who wants to extend the child discount?

Politicians from both sides have expressed support for the expansion of the CTC.

On February 4, Massachusetts Senator Mitt Romney 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. plan could be combined with that of House Democrats.

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.


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