Key point: Tax credits help many Americans when it comes time to file. Raising a family is expensive and this expanded credit could provide an important economic lifeline.
As President Joe Biden faces seething pressure from Democrats over approving additional stimulus payments until the pandemic is over, the Internal Revenue Service is preparing to send out the enhanced child tax credit that was featured in the president’s $1.9 trillion rescue package signed last month.
This first appeared earlier and is being reposted due to reader interest.
The child tax credits essentially serve as another form of direct payments, as Congress boosted the credit from $2,000 to $3,000 and allowed parents with children under the age of 6 to qualify for $3,600. The measure also permits parents of children at an age of 17 to be eligible for a tax credit.
The credit is also fully refundable, and the $2,500 earned-income requirement has been eradicated.
The IRS reported that the tax credit will start going out over the summer in intervals, rather than in just one, big payment. Taxpayers will get half of the credit in monthly cash payments from July through December, which could be between $250 to $300 a month for each eligible child. The rest of the tax relief can be claimed on their 2021 tax returns.
Similar to the qualifications for the stimulus payments under the American Rescue Plan, individuals earning up to $75,000 are eligible for the full enhanced credit amount, as well as joint filers making up to $150,000 and heads of households earning up to $112,500. The amount will then drop by $50 for each $1,000 in income above these caps.
But it’s important to check the filing status of tax returns, as the tax credit payments are largely based on agency estimates from information like income, marital status, and the number of dependents. If the data is not up to date, recipients of the credit could owe loads of money.
IRS Commissioner Charles Rettig told the Senate Finance Committee that the agency is planning to create an online, interactive portal for parents to offer any family or income-related changes.
A group of Democrats called on the White House last week to make the credits permanent, arguing it is essential for a full recovery.
“Expansion of the Child Tax Credit is the most significant policy to come out of Washington in generations, and Congress has an historic opportunity to provide a lifeline to the middle class and to cut child poverty in half on a permanent basis,” the lawmakers wrote. “No recovery will be complete unless our tax code provides a sustained pathway to economic prosperity for working families and children. Permanent expansion of CTC will continue to be our priority.”
The Democrats behind the push include Sens. Cory Booker (N.J.), Sherrod Brown (Ohio) and Michael Bennet (Colo.), as well as Reps. Rosa DeLauro (Conn.), Suzan DelBene (Wash.) and Ritchie Torres (N.Y.).
But Biden recently told lawmakers that he plans to propose a temporary extension of the expanded child tax credit, falling short of committing to making the measure permanent.
The president said he was open to extending the credits for several years, as the current tax relief is expected to nearly halve child poverty.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill. This first appeared earlier and is being reposted due to reader interest. Image: Reuters.