Raising a child is very expensive, but the expanded child tax credit is about to give parents some more money to help.
(CBS Detroit) — Raising a child is very expensive. But many parents and guardians are about to receive a little more help from Uncle Sam. Along with a $1,400 stimulus check and extended unemployment benefits, the $1.9 trillion COVID relief package signed into law on Thursday expands the Child Tax Credit. The American Relief Plan increases the credit from $2,000 to up to $3,600, depending on the child’s age and the family’s income. Qualifying parents will not have to wait for their tax refunds to see that money either. Payments will be issued on a periodic basis. According to the stimulus package, the Internal Revenue Service (IRS) will pay out $3,600 per year for each child up to five years old and $3,000 per year for each child ages six through 17. Payments will be issued automatically on a periodic basis from July to December of 2021, with the remainder issued when the recipient files their 2021 taxes. (Many expect that “periodic” will actually mean monthly or possibly quarterly, but the IRS still has to determine that.) The benefit will not depend on the recipient’s current tax burden. In other words, qualifying families will receive the full amount, regardless of how much — or little — they owe in taxes. Payments will start to phase out beyond a $75,000 annual income for individuals and beyond $150,000 for married couples. As an example, suppose a married couple has a four-year-old and an eight-year-old and earns an annual joint income of $120,000. The IRS could send them a monthly check for $550 starting in July. That’s $300 per month ($3,600 / 12) for the younger child and $250 per month ($3,000 / 12) for the older child. Those checks would last through December. The couple would then receive the $3,300 balance — $1,800 ($300 X 6) for the younger child and $1,500 ($250 X 6) for the younger child — as part of their 2021 tax refund. “Big changes to the way that the tax credit is structured,” says Stephen Nuñez, the Lead Researcher on Guaranteed Income at the Jain Family Institute, an applied research organization in the social sciences. (Nuñez studies cash welfare policy, that includes field work to answer policy-relevant questions about the social safety net.) “Much more generous, fully refundable, no longer any work requirement and the possibility that it would be paid out on either a quarterly or even monthly basis. The newly revised Child Tax Credit will last only last one year. The rules of reconciliation, which Democrats used to pass the stimulus package containing the expanded Credit with a simple majority, don’t allow for deficit spending. Legislation must be deficit-neutral or deficit-reducing for the year, as well as for the next five years and 10 years. The thinking is that political pressure from supporters of a widely popular program would force Congress to extend it in the years to come. “A lot of people were surprised recently because Mitt Romney offered his own child allowance plan that, in some ways, is similar to the Biden plan,” Nuñez points out. “But he also made it fully funded by cutting particular tax credits and cutting other programs. So that if they had chosen to go with his plan, it would have been something that could be made permanent, even under reconciliation. So I have a feeling that, in future policy discussion, when it comes up to a vote one day to make it permanent, that his suggestion may be part of the part of the conversation.” The credit would be fully available to families accounting for 27 million children, according to the Center on Budget and Policy Priorities.
