$3,000/$3,600 child tax credit: how would stimulus payment work?
As part of his American Rescue Plan, a $1.9tn proposed coronavirus relief package, US President Joe Biden has called for eligible families to receive an increased child tax credit.
As part of his $1.9tn American Rescue Plan, President Joe Biden has called for families to receive an increased child tax credit of up to $3,600 per dependent.
Expanded child tax credit: $3,000 or $3,600 per year
Under Biden’s plan, qualifying households would get a credit of $3,000 a year for every child aged between six and 17, and $3,600 for every child under six. The scheme would last for 12 months.
Among the other economic-aid measures for Americans proposed by the ARP is a stimulus check of up to $1,400, a $400 weekly unemployment-benefits boost and an increase of the national minimum wage to $15 an hour.
What is a tax credit?
A tax credit is a sum of money taxpayers can subtract from the amount of tax they owe a country's inland revenue. It can be refundable, allowing you to claim the full credit even if it is more than your tax bill, or non-refundable, which limits what you get to no more than the tax you owe.
A key aspect of the child tax credit in Biden's proposed package is that it would be refundable, so claimants would receive the $3,000/$3,600 in full even if they pay less in taxes.
The ARP, and the child tax credit it proposes, is not yet law; negotiations between Democrats and Republicans are expected in a bid to agree a bipartisan stimulus package, with experts predicting a bill will be passed by Congress by March.
How ARP child tax credit compares to current child tax credit
Currently, individuals on under $200,000 a year and married couples on under $400,000 a year are able to claim a child tax credit of $2,000 per year for under 17s, unless that amount is more than the tax they owe, in which case they can seek an alternative credit of up to $1,400.
Families with earnings higher than the maximum income threshold receive a reduced amount; the planned upper limits for the ARP's expanded child tax credit do not appear to have been confirmed, but it is expected that they would be similar or identical.
More information on the current child tax credit.
Refundable child tax credit would bring 3m over poverty line
According to the Center on Budget and Policy Priorities (CBPP), making the $3,000/$3,600 child tax credit fully refundable would see 27 million more children qualify for the payment, having missed out on the present credit because they belong to low-earning families who do not pay enough tax.
The CBPP adds that the move would lift more than three million people in the US, including two million children, over the poverty line.
Lawmakers also looking to make it permanent
According to a report in the Washington Post on Friday, Democratic lawmakers are also working to make the proposed $3,000/$3,600 child tax credit a permanent scheme, rather than the temporary measure set out in the ARP.
Democrats also want families to receive the expanded child credit in direct monthly payments of $250/$300, rather than having to wait until the end of the tax year to claim a lump sum from the IRS, the Post adds.
Stimulus check and US politics: live news
You can get the latest information on the proposed third stimulus check with our dedicated live blog.
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