With President Joe Biden expected to sign his proposed $1.9 trillion stimulus bill, there will be a sweeping change to the annual child tax credit will be fulfilled, which could give millions of parents and guardians a financial boost. The bill pass the US House on Wednesday with Democratic support.
While some details are being ironed out, here is what is known about the new child tax credit structure:
- The per child amount will increase from $2,000 per year to $3,000 per year in 2021. For children up to age 5, the credit increases to $3,600 per child per year.
- Half of the child tax credit will be available through a monthly payment to parents starting in July. For school aged children, that would mean parents would be eligible for monthly $250 checks, and $300 monthly checks for younger children.
- Taxpayers can opt out of the monthly payments and take the entire credit as part of their annual tax return.
- Parents will be able to claim children up to 17 years old under the child tax credit. Previously, parents could only claim children up to age 16.
- The federal government will use the annual adjusted gross income to determine eligibility for the credit. Couples earning up to $150,000 per year, heads of household earning up to $112,500 per year, and individuals earning up to $75,000 annually will be eligible to claim their children for the full credit.
- For every $1,000 in additional income, $50 per year is reduced per child, plateauing at $2,000 per child.
- The expanded credit is scheduled to last one year, but Democrats are hoping to make the expanded child tax credit permanent.
- There is no limit to the number of children parents or guardians can claim.
- The tax credit is for the 2021 tax year.
The child tax credit is in addition to the direct income checks, which are also part of the $1.9 trillion bill. Congress is set to authorize that most Americans making up to $75,000 a year will get a direct payment of $1,400 (couples making up to $150,000 a year will get $2,800). Heads of households making up to $112,500 annually also will receive the full $1,400. Those making $75,000 to $80,000 ($150,000 to $160,000 for couples) will get a prorated check. Those making over $80,000 ($160,000 for couples) will not receive a check.