$3,000 third stimulus check per child: until what age can it be claimed?

Following the framework of President Biden’s $1.9 trillion American Rescue Plan, legislation to increase and expand the child tax credit including 17-year-old dependents was presented in the House of Representatives.

Up to $300 in monthly direct payments per child

The proposed enhanced child tax credit would see families receiving $3,000 per child 17 and younger and $3,600 per child under 6 annually. Half the slated benefit would come as direct monthly payments and the remainder as a tax refund next year. The bill contemplates direct payments beginning in July and running through December to be paid out by the IRS.

Under the proposal families with older children would still receive a tax credit of $500 for 18-year-olds and 19- to 24-year-olds who are in school full time during at least five months of the year. However those older dependents would not be eligible for the monthly direct payments but households could claim the child tax credit when the parents of those dependents file their annual income-tax form.

Expanded eligibility for households with lower incomes

In their proposal to increase the number of households that qualify for the child tax credit, Democrats on the House Ways & Means Committee removed the current earnings floor whereby a family must earn a minimum of $2,500 per year to even qualify for the child tax credit. The proposal also makes the enhanced child credit fully refundable instead of a maximum refund of $1,400.

The bill would set a cap to receive the maximum amount at $75,000 annual adjusted gross income for individual taxpayers. Above that threshold the benefit would phase out incrementally. After the phase out point for the enhanced child tax credit, the current child tax credit of $2,000 would apply with the size of the benefit starting to phase out for individual taxpayers with an annual adjusted gross income over $200,000.

How can families claim the enhanced child credit?

The IRS would distribute the enhanced child tax credits like the two previous rounds of stimulus checks. The agency will use taxpayers’ prior-year income-tax filings to determine eligibility. The bill gives the IRS until July to program its computer systems to handle the task of sending out the payments.

Half the enhanced child credit would be paid in advance via monthly direct payments of $250 and $300 per child under 17 and under 6, respectively, to families for 6 months through December. Given the scale of the task and timeframe, the IRS could change the frequency of the payments from the desired monthly schedule.

The remainder of the enhanced child credit due could then be claimed on taxpayers' filings in 2022 for the 2021 fiscal year.

beneficiaries can change their status

The legislation is also calling for the creation of an online portal where beneficiaries could change their status as their financial or family situation changes. Since the payments would go out in advance based on a taxpayer's previous income-tax filing there are worries that taxpayers would be penalized after the fact.

To alleviate this worry, the legislation creates a “safe harbor” provision, whereby parents who are mistakenly sent the benefit will not be penalized. Should their family or economic situation change making them ineligible they would not be made to pay back the money at the end of the year.

The bill may take longer than expected to pass

Democrats have stated that they want to move the legislation through the House and Senate quickly. House Speaker Nancy Pelosi has said that she wants to get the covid-19 relief bill passed through the House in the next two weeks.

The Democrats, with a slim majority in the House, are prepared to go it alone bypassing the need to garner any Republican votes. They have approved using the budgetary tool known as ‘reconciliation’, which would require only a simple majority in the Senate to pass the final legislation.

In the Senate, the Democrats need to keep their own caucus onboard with the final covid-19 relief bill. They will need all 50 senators to vote in favor of the bill to ensure it passes with Kamala Harris casting the tiebreaking vote. By setting an upper limit on who would benefit from the expanded measure they hope to keep more conservative Democrats’ votes.

Democrats are pushing to pass the bill before unemployment benefits and other pandemic-related programs expire in Mid-March. The timeline could be slowed down by former President Trump’s second impeachment hearing set to begin Tuesday, 9 February.

Other proposals on the table

There are calls to make the enhanced child tax credit measures permanent as opposed to only for the 2021 fiscal year. In the House Representatives Rosa DeLauro, Suzan DelBene and Ritchie Torres who are reintroducing the American Family Act as a standalone bill that would do just that.

For their part Republicans are opposed to the overall size of the covid-19 package as laid out by Biden. However there was a surprise proposal from Mitt Romney for an even larger child benefit. His proposal though met with criticism from his GOP colleagues.

Senators Marco Rubio and Mike Lee said in a joint statement “An essential part of being pro-family is being pro-work. Congress should expand the Child Tax Credit without undercutting the responsibility of parents to work to provide for their families.” In 2017 they helped expand the child tax credit in 2017.

Millions of children could be pulled out of poverty by $3,000 child benefit

One of the stated goal of expanding the child tax credit would be to reduce childhood poverty. Researchers at Columbia University have found that the Biden Plan, the framework for the current proposal, could curb child poverty by as much as 54 percent. According to the Center on Budget and Policy Priorities (CBPP) an expanded child tax credit would lift more than three million people in the US, including two million children, over the poverty line.

The CBPP has said that making the $3,000/$3,600 child tax credit fully refundable would see 27 million more children qualify, having missed out on the current credit, or only been eligible for a partial amount, because they belong to low-earning families who do not pay enough tax.

Third stimulus check: live updates

You can get the latest updates on the proposed third stimulus check, and other mooted aid measures such as the expanded child tax credit, by following our dedicated live blog.