Biden’s proposal and this possible change to the child tax credit are not yet law. You may still be able to get more money back under the current version of the credit. At a basic level, the CTC is a credit that parents can claim to theirdepending 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 exactly is the child discount?
The CTC is 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 while 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 withunder $ 200,000.
How is the tax credit for children related to Biden’s incentive law?
Biden’s American Rescue Plan (PDF) called on lawmakers to expand the CTC. The proposal that House Democrats plan to release says 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, according to the Washington Post.
The level of 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 will be sent monthly over the course of a year from 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.
An analysis of the Columbia University proposal found it would reduce the number of children in poverty by as much as 54%, or about 5 million children. More than 1 million black children would be lifted out of poverty by the plan, the researchers found, according to the Post.
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.
Why does this tax credit receive so much support? In general, 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. Having Democrats push for a tax credit that Republicans created makes bipartisan support for improving credit for families more likely.