Americans are eagerly awaiting the third round of stimulus checks. They have big expectations in terms of the amount they may get. Since they are more focused on the stimulus check, they are overlooking another crucial part of the Democrats’ $1.9 trillion coronavirus relief package that may give qualifying families more money than the direct payment, and it is the child tax credit (CTC).
The child tax credit provides financial support to parents, helping them to take care of their kids. Since it’s a credit, it reduces the federal tax liability of the parents. Presently, this amount is up to $2,000 per child. In comparison, the proposed stimulus check amount is up to $1,400.
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Democrats, however, in their stimulus package propose raising this amount to $3,600 per child for kids below 6 years, and $3,000 for minors including those age 17. Also, the proposal makes the credit fully refundable, as well as removes the limit (both dollar cap and earnings) that restricts many low-income families with kids to get the full credit.
Those with adjusted gross income (AGI) of up to $75,000 (up to $112,500 for head of household and up to $150,000 for joint filers) would be eligible to get full credit. The credit would start to phase out for individuals with AGI of $200,000 or more, and joint filers with AGI of $400,000 or more.
Additionally, the proposal calls for making the payment to families monthly, rather than making them wait until the end of the year, i.e. when they file a tax return.
How does the CTC help the economy?
As per the Center on Budget and Policy Priorities, this credit would be available to about 27 million children. Also, CBPP estimates that such changes could bring around 9.9 million children closer to or above the poverty line. This 9.9 million estimate includes about 441,000 Asian American, 2.3 million Black and 4.1 million Latino children.
Along with reducing poverty, the CTC also assists in strengthening economic activity. It has been seen that families tend to spend the tax amount they get as a refund.
If Congress approves this plan, the eligible parents could expect to receive the first payment in July. It is very likely that the proposal to expand the CTC would be part of the stimulus package. This is because politicians on both sides seem to be favoring it.
Earlier this month, Sen. Mitt Romney came up with his proposal that includes the CTC. Romney’s proposal calls for providing $4,200 a year for every child up to 6 years and $3,000 a year for those aged 6 to 17.
In 1997, it was the Republicans who first came up with the concept of the CTC as part of the Taxpayer Relief Act. Then in 2017, Sen. Marco Rubio led the Tax Cuts and Jobs Act, which doubled the CTC from $1,000 to its present amount.