on Saturday. This leaves a vote from the House of Representatives that Speaker Nancy Pelosi says will happen on Tuesday and then it’s to Biden’s desk for his signature. Before the week ends, Americans will know whether they’ll receive the and more money from the Child Tax Credit.
Theincreases the existing child tax credit, or CTC, to as much as $3,600 per child (more than double the ) and would let families receive the funds “periodically” instead of just annually . This increase in the CTC would reduce child poverty by 40%, according to a report from the Center on Budget and Policy Priorities.
Here’s everything you need to know about the CTC, including eligibility requirements for you and your kids, how much money you could get and what all could change in a final law. (Here’s every way.)
What is the Child Tax Credit?
At a basic level, the Child Tax Credit is a credit that parents and caregivers can claim to help reduce their, depending on the number and ages of their dependents. For many, it may provide a much-needed source of relief as part of a .
The CTC right now is a $2,000 credit parents can claim on their taxes for every child under the age of 17 (the same age range forthat was used for the first and second ). And if that credit exceeds the amount of , parents can still receive up to $1,400 of the balance as a refund; this is technically referred to as the Additional Child Tax Credit or refundable CTC. For example, a married couple with children ages 5, 10 and 12 would receive a total child tax credit of $6,000 — unless they’re , in which case they’d receive $4,200.
will temporarily increase the amount from $2,000 to $3,600 per child under 6 and $3,000 for children older than 6. The credit would also be fully refundable and there wouldn’t be a $2,500 earnings floor. Also, the plan would allow families to receive funds as monthly payments July 2021 to December 2021 instead of one lump sum as part of a tax refund.
Am I eligible for the Child Tax Credit?
Families with kids under 6 would receive up to $3,600 per child under the new. Families with children aged 17 and under would receive a credit of $3,000 per child. Families with older kids are also eligible: You can claim $500 for each child aged 17 and 18, or for full-time college students between the ages of 19 and 24.
The tax credit applies to children who are considered related to you and reside with you for at least six months out of the year.
Note that though the eligibility requirements are relatively broad, higher-income families may receive a reduced credit. But married couples filing jointly with an adjusted gross income under $400,000 are eligible for the full amount, as are individuals with anunder $200,000.
The size of the credit would start to phase out for single people earning more than $75,000 a year, heads of household earning more than $112,500 a year and married couples earning more than $150,000 a year.
Other ways the Child Tax Credit will change with the new relief bill
In addition to new qualifications and payment amounts, thewould expand the tax credit so that:
- The credit would be fully refundable.
- There’d be no dollar cap and earnings limits that prevent many low-income families with children from receiving the full credit, according to the Center on Budget and Policy Priorities.
- Payments would be sent monthly over the course of a year, starting in July to December 2021, instead of once during tax season.
The bill also would expand other child-related credits so families could claim up to half their child-care expenses on their taxes.
For the bottom 20% of families in terms of income, the proposed expansion of the CTC would increase income by an average of 9.7% — even higher if you consider only tax filers with children, according to the Institute on Taxation and Economic Policy. The proposal would also lift 4.1 million children above the poverty line, cutting the number of children in poverty by more than 40%, the Center on Budget and Policy Priorities found.
Will the Child Tax Credit be based on 2019 or 2020 taxes?
It would likely depend. The IRS will be tasked with basing your eligibility for the Child Tax Credit on your, if that’s been processed by the first July payment. Otherwise — in the case of a , for example — the agency would use your 2019 taxes to determine the amount you’re owed.
How long will the new Child Tax Credit last?
The Child Tax Credit for 2021 is considered a temporary reprieve for the year and would last only through 2021. Any changes to a 2022 CTC would need to take place in a separate bill.
For more information, here’s, when the and how to .