Up to $3,600-per-child tax credit in stimulus plan could lift millions out of poverty
The COVID-19 stimulus bill expected to be signed into law in the coming days includes a Child Tax Credit expansion that experts say could lift millions of children out of poverty.
What is the Child Tax Credit?
The proposal, included in the $1.9 trillion American Rescue Plan, would temporarily boost the current Child Tax Credit — which is for parents with dependent children — and expand the benefit to more families, including those who currently make too little to qualify for the full benefit.
How much would families receive?
Families would get $3,600 per child under age 6 and $3,000 per child ages 6 to 17 in tax benefits over the course of a year.
Single parents making up to $75,000 a year and couples making up to $150,000 a year would be eligible for the full benefit.
Payments would phase out after that.
How the credit works
Families could see monthly payments of up to $300 starting in July and through the end of the year.
The other half of the full benefit could then be claimed on income taxes at the end of the year.
The credit would likely be based on income in 2020 for most taxpayers, The Washington Post reports.
How it’s different
The current Child Tax Credit provides up to $2,000 per child under age 17. Families can also receive a $500 nonrefundable credit for other dependents, including older teenagers and college students, according to the Tax Policy Center.
It phases out for single parents making an adjusted gross income over $200,000 and couples making over $400,000.
The entire credit is applied to income taxes at the end of the year.
Why it matters
The proposal could, at least temporarily, lift 4.1 million children above the poverty line, cutting the number of children living in poverty by 40%, according to an analysis from the Center on Budget and Policy Priorities, a nonpartisan research institute. It would lift an estimated 1.1 million children out of “deep poverty” — defined as those with household incomes below half of the poverty line.
The expansion would also provide full benefits for the roughly 27 million children whose parents do not currently receive the full tax credit because they earn too little income.
“Black and Latino children in particular, whom the current credit disproportionately leaves out or leaves behind, would benefit,” the analysis says.
Democrats who proposed the expansion have said it’s especially important during the pandemic.
“The pandemic is driving families deeper and deeper into poverty, and it’s devastating,” Rep. Richard Neal of Massachusetts, chair of the House Ways and Means Committee, said in a statement to CNN last month. “This money is going to be the difference in a roof over someone’s head or food on their table. This is how the tax code is supposed to work for those who need it most.”
How we got here
The legislation to expand the Child Tax Credit, unveiled by top Democrats in early February, was included in the coronavirus stimulus package.
The package passed the U.S. House of Representatives in February and passed the U.S. Senate on Saturday along party lines, 50-49. Now, it will go back to the House, which will vote whether to approve the changes made by the Senate. If it passes, the legislation will go to President Joe Biden’s desk to be signed into law.
The House is expected to vote on the bill as early as Tuesday, and Biden could sign it early next week.
Democrats passed the bill through both chambers using budget reconciliation, which meant only a simple majority was needed to advance it rather than the usual 60-vote threshold. The bill has not received support from Republicans, who have balked at its cost and called for aid to be more targeted.
No Republicans voted in favor of the bill in either the House or Senate.
What else to know
The COVID-19 relief package also includes $1,400 direct stimulus checks to many Americans, an extension of federal unemployment benefits and funding for state and local governments, among other provisions.
The direct payments could start going out this month if the bill is signed into law by March 14, the day current federal unemployment benefits are set to expire.
Other aspects of the package, like the Child Tax Credit expansion, could take longer to roll out because they involve “larger changes to existing programs,” CNN reports.
This story was originally published March 9, 2021 at 7:26 AM with the headline "Up to $3,600-per-child tax credit in stimulus plan could lift millions out of poverty."
