This winter has been dragging on, with seemingly no consistent relief in sight for struggling families. Thankfully, legislators have been working to draft #CovidKidCash, a proposal that would give parents and legal guardians up to $300 a month per child. This new child tax credit would provide as much as $3,600 per child for the year.
The measure is being proposed as part of President Biden’s $1.9 trillion economic relief package in response to the coronavirus pandemic. With one of the highest childhood poverty rates of any developed nation, the US currently spends very little on child benefits compared with other countries. The proposed tax credit would potentially lift 5 million children out of poverty.
What do I need to know?
Each dependent child under the age of 18 would qualify for the credit, with the amount decreasing for folks with incomes over $75,000, or $150,000 for couples filing jointly. Regardless of your citizenship status, your child would qualify if they have a Social Security Number.
If you’re a parent, you might already be familiar with the existing child tax credit, which provides $2,000 per child in 2020. If the credit on your taxes ends up exceeding the amount you owe, you can get up to $1,400 as a refund.
Under the new proposal, the IRS would increase the credit to a maximum of $3,600 per child under age 6, and $3,000 per child between the ages of 6 and 17. These credits will not be deducted from your tax liability, meaning you will still qualify for any other credits you normally receive. Instead of topping out at $1,400, the entire amount would be refundable, meaning even people who don’t owe taxes will get this money.
Also, families wouldn’t need to wait until they file their taxes to get this financial relief in one lump sum. If passed, the legislation would allow the refund to be broken down into monthly payments—$300 per month for kids under 6, and $250 per month for kids aged 6-17. The monthly payments could start going out as soon as this coming July (or as quickly as the IRS can reasonably disperse the funds.) Similar to the previous relief payments, your total credit would be determined by your prior-year income.
If your financial situation has changed (which is the case for so many folks right now,) don’t worry! The proposal includes an online portal managed by the US Treasury that would allow you to update your information.
What’s the status of the proposal?
Congress is aiming to pass this legislation, along with the rest of the Biden Administration’s relief package, within the next month. Aides have cautioned that it’s possible some details of the proposal could change between now and then.
In the meantime, some Democrats are pushing to make the child tax credit a permanent feature of the tax code. On the other side of the aisle, Republican Senator Mitt Romney has also introduced his own child tax credit proposal which has a higher payout, but more strings attached.
The status of the negotiations in Congress are changing by the hour, but experts think it seems likely that a bill that looks very similar to the Democrats’ proposal will be passed within the next few weeks.