$3,600 Child Tax Credit: how will it be affected by Biden's American Families Plan?
The expanded CTC will provide monthly payments for millions of families and the one-year duration looks likely to be extended by the new economic package.
On Wednesday evening President Joe Biden gave his first address to a joint session of Congress since entering office. The speech, coming on his 100th day as President, celebrated some of his early successes and outlined his plans for the future.
Key amongst the new announcements was a first look at the American Families Plan (AFP), which is the third instalment of his three-part Build Back Better programme. The AFP aims to provide greater support for working families and represents a marked change in government policy.
In his speech Biden promised to “change the dynamic” of economic and social mobility in America with the AFP, saying: “Any country that out-educates us will out-compete us.”
Child Tax Credit extension announced in new bill
The recent American Rescue Plan, signed into law in mid-March, included a revolutionary overhaul of the Child Tax Credit (CTC) that had been in place for decades. The new legislation transformed the credit into a monthly direct payment for families, worth up to $300 per month for children under six and $250 for those aged between six and 17.
The bill only included one year of funding for the new programme, which was expected to expire at the end of June 2022. However the American Families Plan will provide an addition burst of federal spending to ensure that the new programme can remain in place until at least 2025.
The new tax credit will be fully refundable on a permanent basis, meaning that even households who pay little or no tax will still be eligible for the full entitlement. However the new monthly payment system and more generous amount are only guaranteed until 2025 as it stands.
The White House’s AFP fact sheet states: “The President is committed to working with Congress to achieve his ultimate goal of making permanent the Child Tax Credit as well as all of the expansions he signed into law in the American Rescue Plan.”
When will the new Child Tax Credit be introduced?
Wednesday’s confirmation that the CTC would be extended to 2025 came after vocal support for the programme from numerous Democratic lawmakers. The CTC has been one of the most hotly-anticipated facets of the American Rescue Plan and the White House are confident that it will yield significant results once introduced.
The White House fact sheet claims: “The expanded Child Tax Credit in the American Rescue Plan benefited nearly 66 million children, and it was the single largest contributor to the plan’s historic reductions in child poverty.”
But before the monthly payments can start helping working families, the IRS has to build and implement a national distribution system of almost unparalleled scale. The payments will be expected to go out on a monthly basis with the whole system to be administrated through an online portal that is yet to be developed.
The IRS are still in the midst of a busy tax season and have been tasked with distributing the third stimulus check for the last six weeks. When pressed earlier this month on the prospect of hitting the July deadline set in the American Rescue Plan, IRS Commissioner Charles Rettig confirmed that they are still hoping to have the new system ready by then.