Is the child tax credit refundable?
As the American Resuce Plan is introduced in the Senate, we take a look at what President Biden's new stimulus bill offers to address the worrying rise in childhood poverty.
Child tax credits provide financial support for people who have children or other dependents aged less than 17. The credit gives an income boost for parents and guardians and eligibility is based in part on household income.
As it stands the credit is worth up to $2,000 per child, but there are other requirements that you must fulfil to receive the support. The claimant must have a Social Security number and the current child tax credit is partly non-refundable, meaning that the lowest earners are not able to receive the full amount.
Why was the support limited for the poorest families and how will President Joe Biden’s new stimulus bill address this inequality?
New child tax credits will be refundable
A tax credit is essentially a reduction or a rebate for taxes paid to the IRS. Tax credits in general can be split into two types: refundable and non-refundable.
A refundable tax credit is available to eligible claimants no matter how much tax they have owed. However a non-refundable tax credit is capped at the amount of tax that the claimant has paid; if you only pay $1,000 in income tax then you would be unable to receive more than $1,000 in the form of a non-refundable tax credit.
In the past the child tax credit has been a non-refundable payment, which meant that filers who pay no or very little in the form of tax were unable to receive the full amount. SmartAsset report that you would need to earn at least $2,500 to qualify to receive the support.
Right now, we have a tremendous opportunity to lift kids out of poverty and provide much-needed support to families across the country.— Michael Bennet (@SenatorBennet) March 1, 2021
After we pass our child tax credit proposal as a part of the #AmericanRescuePlan, I'll keep fighting to make sure it's made permanent. https://t.co/5enzobq5ZK
Biden’s new stimulus bill aims to address the wealth disparity that has been exacerbated by the pandemic, and the sharp rise in childhood poverty that has been recorded in the past year. Recent figures suggest that nearly 11 million children are currently living in poverty in the United States, many of whom would be denied financial support because of the non-refundable child tax credits.
However the new stimulus bill that is expected to be voted on in the Senate this week amends the current child tax credit requirements to make then entirely refundable, meaning that there is no bottom threshold on eligibility.
How much will the new child tax credits be worth?
The $1.9 trillion stimulus bill includes various measures designed to get direct support out to those in need. The new-look child tax credits will be invaluable for millions and provide much greater support for recipients.
About 2.5 million women have been forced out of the workforce during the pandemic. The American Rescue Plan provides relief to women and families with $1,400 payments, a $3,000 child tax credit, and funding to safely reopen schools and child care. It’s time for the Senate to act.— Vice President Kamala Harris (@VP) March 2, 2021
Claimants will now be able to receive up to $3,600 per year for children aged under six, and up to $3,000 for those aged between six and 17. Those thresholds are based on the age that the child was on the last day of the previous tax year.
There are also plans to alter the distribution of the child tax credits so the payments are more similar to the stimulus checks that have been so popular throughout the pandemic. Rather than arriving as a tax rebate once recipients have completed their filings, the payments would come as monthly direct deposit worth up to $300 per month.
Te recomendamos en English
- US NEWS Is a government shutdown going to happen at the end of the month?
- ALFREDO RELAÑO Football heading for 30-minute halves and stopped clock
- NFL Houston's Mills will be fourth rookie QB to start this year
- NFL Tom Brady admits he wants to be paid in Bitcoin
- SOCCER UEFA criticises FIFA for lack of consultation on World Cup proposals
- JUVENTUS Juventus player Arthur Melo involved in car crash