The $1.9 trillion stimulus plan called the American Rescue Plan is just one signature away from becoming law –And here’s what you need to know about it.
While most Americans were focused on the $1,400 stimulus checks, it’s the extension of the child tax credit in the relief legislation that many are calling a radical new policy.
“Enhanced” Child Tax Credit
The COVID-19 relief legislation expands the child tax credit to $3,000 annually per child aged 6-17 and to $3,600 for kids under 6 for single parents earning less than $75,000 annually, $112,500 for the head of households, and $150,000 for married couples. (The current child tax credit is $2,000 per child under 17 for single parents or heads of household earning less than $200,000 or married couples making less than $400,000 annually).
The legislation’s enhanced child tax credit breaks now direct the IRS to distribute periodic payments amounting to half the tax credit to low- and middle-income families this year.
If the Treasury Department decides to disburse those payments monthly, as it’s been indicated, it would provide a guaranteed income for families in the form of $300 monthly checks per child under 6 and $250 monthly checks per child between 6 and 17 from July to December. (Parents who qualify would be able to collect the other half of the child tax credit when they file their taxes in 2021.
According to a report from the Center on Budget and Policy Priorities, this increase would cut the number of children in poverty by “more than 40 percent.” The enhanced child tax credit makes it possible for parents earning less than $2,500 in annual income, who previously didn’t qualify for the refundable part of the credit, to also receive payments from the IRS.