Democrats Unveil $3,000 Child Benefit as Part of Biden Stimulus Bill
by Maurie Backman | Feb. 9, 2021
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Parents are hurting during the pandemic. Here's one proposal that could help them.
The coronavirus pandemic has been tough on everyone, but families with children have had their own unique struggles. Many parents, for example, have had to dip into their savings accounts to cover added childcare costs. A lot of school districts are not open for full-time in-person learning, causing parents to scramble to find alternative care so they can work. And, in the absence of adequate care, some parents have had to leave the workforce temporarily. All in all, many families are dealing with additional costs and reduced incomes.
Thankfully, President Biden recognizes the toll the pandemic has taken on those with children. To this end, he's included provisions for parents in his sweeping $1.9 trillion coronavirus relief package. And on Feb. 8, House Democrats introduced legislation designed to move that relief forward.
Parents may soon get a lifeline
Rep. Richard Neal, the Ways and Means Committee chairman, introduced the enhanced Child Tax Credit bill yesterday. He's taken the lead on crafting the stimulus package legislation. Under the new bill, the Child Tax Credit would increase to $3,600 per child under the age of six and $3,000 per child age six through 17 for a single year.
The credit would be paid in full to single parents earning up to $75,000 per year and married couples earning up to $150,000 per year, after which it would begin to phase out. These are the same income thresholds that applied to previous rounds of stimulus checks.
Families will be eligible to receive their credit on a monthly basis, whereas they currently have to wait until they file a tax return. That change will no doubt help a lot of households better manage their cash flow and avoid costly debt.
If this legislation is passed, payments under the new, enhanced Child Tax Credit will begin in July and last for a year. Furthermore, more low-income households will collect the credit in full. Unlike the current credit, this one would be fully refundable.
A big change to an important credit
To be clear, the Child Tax Credit already exists -- it's been around for years. It's worth up to $2,000 per child under the age of 17. Single parents earning up to $200,000 a year and married couples earning up to $400,000 can claim the credit in full on their taxes, after which it begins to phase out.
But the enhanced credit will work differently. First, eligible families will receive more money. Second, families will be able to receive their money in monthly installments. Right now, families who claim the credit on their tax return only get that money as a single lump-sum payment when their tax refund comes in.
Speaking of refunds, right now, the Child Tax Credit is only partially refundable for up to $1,400 per child. Let's say a family doesn't owe the IRS any tax and has one child who's eligible for the full $2,000 credit. That family will only get a $1,400 refund. The new proposal, however, makes the credit -- in its higher amount -- completely refundable. Families that owe no tax will still be eligible for the credit in full.
Relief for families
These changes to the Child Tax Credit may only stay in place for a year. However, some lawmakers have introduced standalone legislation that would continue the expanded benefit on a permanent basis. Even if they don't succeed, that one-year enhancement could still be a lifeline for struggling families.
The expanded Child Tax Credit hasn't officially been passed into law yet. However, Democratic lawmakers hope to have Biden's stimulus legislation approved by the end of the month. And if this measure comes through in its current state, a lot of parents will breathe a sigh of relief.
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About the Author
Maurie Backman is a personal finance writer who covers everything from savings to retirement to healthcare. Her articles have appeared broadly on major outlets such as CNBC, MSN, and Yahoo.
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