Stimulus Update: New Stimulus Proposal Includes Payments of Up to $3,600 per Child
by Dana George | Feb. 10, 2021
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Here's how the president hopes to get money to the families who need it most.
President Joe Biden's $1.9 trillion stimulus relief proposal is like a living, breathing thing, evolving by the moment. There is no guarantee what will make it into the final bill once compromises and adjustments have been made, but it's worth noting the portions of the bill designed to send direct aid to families who could use a hand up.
More money to families with children
Proposed payments of up to $3,600 per child will replace the current Child Tax Credit, and if passed, will work like this:
- A direct monthly payment of $300 per child (for an annual total of $3,600 per child) will be made to parents or guardians of children under the age of six.
- A direct monthly payment of $250 per child (for an annual total of $3,000 per child) will be made to parents or guardians of children ages six to 17.
- The monthly payments will be "fully refundable," which means that low-income families who don't owe additional taxes when they file will still receive the full amount.
- Monthly installments would begin in July.
- The increased Child Tax Credit is initially set to run for one year but could become permanent.
- Income eligibility is similar to recent stimulus checks. Single parents with an AGI less than $75,000 and couples with an AGI less than $150,000 would be eligible for full payments. Singles earning up to $200,000 and couples earning up to $400,000 would still receive payments but at a phased-out rate.
The current Child Tax Credit
Currently, parents or guardians receive a Child Tax Credit when they file taxes. This credit provides up to $2,000 per child under the age of 17, and up to $500 for dependents ages 17 and 18, and full-time college students from 19-24. The amount is reduced by 5% for an AGI over $200,000 for single parents and $400,000 for married parents. If a family's tax credit exceeds the amount of taxes they owe, they can get up to $1,400 of that balance as a refund.
Here's how the proposed changes to the Child Tax Credit would impact everyday families:
- Rather than wait for a one-time credit at tax time, parents will receive the credit through monthly payments.
- The amount of the credit would provide up to $1,600 more annually for children under the age of six, and up to $1,000 more annually for kids from ages seven to 17.
We are not yet clear how dependents from ages 17-24 will be impacted by this proposal, or if their Child Tax Credit will remain the same.
Signs of political unity
Political infighting is nothing new. We need look no further than Thomas Jefferson vs. Alexander Hamilton, or the entire U.S. Senate vs. John C. Calhoun to see that fighting among themselves is what Congress does. And that may be part of the reason Congressional Democrats -- with a razor-thin majority -- threw their hands up and decided to proceed with Biden's relief proposal, with or without Republican support.
For example, despite pushback from the GOP, Democrats have decided to send $1,400 stimulus checks to every eligible American, including dependents. This is up from the $600 received in the second round of stimulus checks.
Interestingly, support for the proposed changes to the current Child Tax Credit appears to exist across the political aisle. In fact, the Democratic proposal is quite similar to a bill introduced last week by Republican stalwart Senator Mitt Romney.
On Tuesday, Biden answered a pool reporter's question regarding his priorities by expressing concern for the number of children in the country without enough food to eat, making it clear that he supports more direct aid to families with children. Ideally, bipartisan support will build. If not, it looks like the Democrats are willing to go it alone.
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About the Author
Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business.
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