What's the current child tax credit entitlement? Who is eligible?
President Biden's new coronavirus stimulus package includes a boost for the child tax credit programme, but how much are parents currently entitled to?
While campaigning for the 2020 election President Joe Biden pledged to provide economic support for those suffering the consequences of the coronavirus pandemic. In his first days in office he signed a series of executive orders boosting the minimum wage for federal workers to $15-per-hour and extending the eviction moratorium.
The bill would see the annual entitlement raised to up to $3,600-per-child, but how does that compare to the existing programme?
Child tax credit provides rebate for child dependents
The current child tax credit allowance provides up to $2,000-per-child, for child dependents under the age of 17. This means that the child must be aged 16 or younger on 31 December to be eligible for a tax credit for the following year.
Of that $2,000 maximum, up to $1,400 is refundable for each qualifying child. This means that you can be entitled to $1,400 even if you pay no tax. Like with the stimulus checks there are thresholds of eligibility based on earnings. Currently that is $200,000 for an individual or $400,000 for a couple who file jointly. Above those amounts, the entitlement decreases until it is entirely phased out.
Biden aims to restructure child tax credit payments
The new covid-19 relief bill would see the maximum annual entitlement raised to $3,600 for children aged less than 6, and $3,000 for those aged between 6 and 16. This sizeable increase is designed to reduce the strain felt by families during the pandemic.
Biden said of the proposal: "All told, the American Rescue Plan would lift 12 million Americans out of poverty and cut child poverty in half. That's 5 million children lifted out of poverty.”
Another crucial element of the new-look child tax credits are changes to the distribution process that are designed to get the support out to people who need it more efficiently.
Firstly the ‘refundable’ element would be removed, meaning that all children whose household earn less than the threshold amount would be eligible for the full entitlement. According to the White House this would see an additional 27 million children become eligible to receive the full support.
Secondly Biden wants the financial support to be distributed as a monthly payment, most likely made as a direct deposit. This removes the 12-month wait between payments and will turn the tax credit into a recurring payment worth up to $300-a-month for eligible Americans.
The American Rescue Plan is expected to be officially tabled in Congress on Monday or Tuesday with the Democrats willing to use reconciliation to force the legislation through. If they decide to do so the bill could be passed into law by mid-February and payments could potentially begin soon after.