On Saturday, the Senate voted to pass the US $ 1.9 trillion Rescue Plan Act, which includes provisions that increase the tax credit for children to $ 3,000 per child ages 6 to 17 and $ 3,600 per year for children under 6 for the tax year 2021.
And Americans with children under 18 can receive some of the new credit as early as this summer.
Under Saturday’s legislation, the IRS could begin providing advance credit for 2021 through periodic payments of $ 250 for school-age children from July, depending on what the Treasury Department determines is workable. Under the proposed schedule, which could be as frequent as monthly, families could receive nearly half of their total child tax credit this year and then claim the remaining amount on their 2021 tax returns.
“This plan will give the most struggling families the help and breathing space they need to get through this moment,” President Joe Biden said in a statement Saturday.
The new enhanced benefits, which pertain specifically to teens who are first 17, are income-based and would gradually disappear for individuals making more than $ 75,000 per year or $ 150,000 for married couples filing jointly.
From there, the credit would be reduced by $ 50 for every additional $ 1,000 of adjusted gross income earned. That means that the $ 3,000 credit provided to parents of children ages 6 to 17 will be phased out completely for individuals making $ 95,000 and those making $ 170,000 filing jointly.
Families who do not qualify for the new $ 3,000 credit because they earn higher adjusted gross earnings can still claim the $ 2,000 per child credit available to those making up to $ 200,000 ($ 400,000 for married couples applying jointly).
The Covid-19 aid package would also refund the benefit in full. Under the current children’s tax credit, if the taxpayers exceed their taxes owed, they can only get up to $ 1,400 as a refund. But under the new rules, they could receive the full $ 3,000 or $ 3,600 as a refund, depending on the age of the child.
Parents do not have to be employed to receive the new child discount. The new provisions allow households with no income to claim the credit. This is a big change, as previous rules limited credit to those who made at least $ 2,500. This meant that very low-income families previously did not receive full credit.
The American Rescue Plan also extends child tax credit to those living in US territories.
The House will vote on the Senate version of the US bailout on Tuesday before going to Biden’s desk this week for his signature.
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