$16,000 Stimulus? Biden’s Child Tax Credit Is Lifting Millions of Americans

$16,000 Stimulus? Biden’s Child Tax Credit Is Lifting Millions of Americans

To qualify for the full tax credit, a household’s adjusted gross income must be below $125,000.

 

Here's What You Need to Remember: Its reach should be expansive. White House officials have estimated that households representing more than sixty-five million children—or nearly 90 percent of all children in the United States—will receive the payments via direct deposit, paper checks, or debit cards.

Those headline-grabbing $1,400 coronavirus stimulus checks do seem like pocket change when compared to the lofty sum of $16,000.

 

But for financially struggling parents who meet the requirements, that’s exactly how much they will get their hands on come tax season next year.

As part of President Joe Biden’s ambitious $1.9 trillion American Rescue Plan, individuals who pay out of pocket for child care services now can claim those expenses in tax credits of $8,000 for one child and the maximum of $16,000 for two or more children.

Keep in mind that parents must first meet income thresholds. To qualify for the full tax credit, a household’s adjusted gross income must be below $125,000. And if the income earned eclipses that amount, the tax credits will phase out at 50 percent, which means that instead of receiving the full $16,000, these people will net $8,000.

Do take note that the rate phases down again to 20 percent for individuals earning $183,000 and will stay at that level until the income reaches $400,000. The credit completely phases out for those earning $438,000 or more.

For parents out there who do believe that they will be eligible for these tax credits, it is probably in their best interest to start gathering all of the necessary forms to make the process easier when tax season rolls around next year.

Just make sure to keep all receipts, forms, or documents outlining what was paid for related transportation and to babysitters, nannies, day care, and camps. Then during the next tax season, all one has to do is complete Form 2441 and attach it to their tax returns.

Parents should also be aware that these benefits are entirely different from the new child tax credits, for which the payments will start being sent out on July 15. The White House has stated that nearly forty million families will be eligible for the $250 or $300 cash windfall each month through the end of the year.

Its reach should be expansive. White House officials have estimated that households representing more than sixty-five million children—or nearly 90 percent of all children in the United States—will receive the payments via direct deposit, paper checks, or debit cards.

“The American Rescue Plan is delivering critical tax relief to middle class and hard-pressed working families with children. … Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come,” Biden said in a prepared statement.

If the nearly $2 trillion American Families Plan is eventually green-lighted, the child tax credit would be extended four more years—through the year 2025.

Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn. This article first appeared earlier this year.

Image: Reuters.