Low- and middle-income families struggling to afford child care and other expenses, new analysis says, would benefit from further tax cuts through 2025 under the new tax plan. White House Child Tax Credit.
Most of the breaks would go to households with incomes below $ 51,700, but even those with lower six-figure incomes would get help, according to data from the Institute on Taxation and Economic Policy, a Washington-based research.
President Joe Biden’s U.S. Family Plan, unveiled Wednesday, would continue to give eligible families $ 3,000 per year for every child ages 6 to 17 and $ 3,600 per year for ages 5 and under until 2025.
These amounts are now only in place for this year. The credit extension would mean that next year the poorest 20% of eligible Californians, with incomes of up to $ 29,100, would average $ 4,110, and they would get a little more in subsequent years.
Eligible households with incomes between $ 29,100 and $ 51,700 would see an average increase of $ 2,940 in credits next year.
The extension of the child tax credit is part of the $ 1.8 trillion Biden plan that would create further benefits for families with children. A separate credit, the Temporarily Enhanced Child Care and Dependents Tax Credit, would become permanent.
This break is designed to help families specifically with child care expenses. The child tax credit can be used for any expense related to children.
Overall, ITEP estimates California taxpayers will receive a $ 12.9 billion benefit next year from the child tax credit alone.
The credits would be ârefundable,â which means that if the credit is more than the tax you are supposed to pay, the government will make up the difference. So if you owe $ 600, but you qualify for $ 3,000 in credits, Washington will give you $ 2,400.
“The administration’s decision to make the credit fully repayable on a permanent basis is a real game-changer,” said Aidan Davis, senior state policy analyst at ITEP.
The credit would have a significant impact on reducing child poverty, Davis explained, because it “would step up the stubbornly high rate of child poverty in the United States.”
Previously, more than a third of children were considered “too poor” to fully benefit from credit and many were completely excluded, she said.
How much could I get?
The full credit would go to people with adjusted gross income of $ 75,000 or less and to joint tax filers earning up to $ 150,000. After that, it starts to disappear.
Here’s what the ITEP found the Biden plan to mean for middle- and upper-income people receiving the credit:
âª 20% of average income ($ 51,700 to $ 83,200): average credit increase of $ 2,650.
âª Next 20% ($ 83,200 to $ 151,100): average credit increase of $ 2,250.
âª Next 15% ($ 151,100 to $ 358,700): average credit increase of $ 1,780.
Above this level, very few families would see a credit break.
Under the new law, the Internal Revenue Service plans to begin sending monthly checks, which will represent one-twelfth of the benefit, starting in July.
This means those who qualify for the full amount will receive $ 300 per month for children 5 and under and $ 250 for those 6 to 17. The credit for the first half of 2021 will be given when people file their 2021 tax returns next year.
But for 2022, without further action, credit limits would drop to a maximum of $ 2,000 per child under 17, and the benefit would be reduced even more drastically, if not eliminated, for many low-income families.
Maintaining the monthly payment is especially important for low-income families, said Elaine Maag, senior research associate at the non-partisan Urban Institute-Brookings Tax Policy Center.
âMonthly payments could help people pay those regular bills. Demonstrations of monthly cash payments showed that beneficiaries were healthier, able to repay their debts and were under reduced pressure from unpaid care work, food insecurity and underemployment, âhe said. she declared.
Help with childcare costs
The proposal is part of a larger series of changes Biden has proposed to help families with children.
It would permanently increase another important tax break for families, the tax credit for child care and dependents. This year, families can get a credit for up to half of their eligible child care expenses for children under 13, up to a maximum of $ 4,000 for a child and $ 8,000 for a child. two or more.
Families earning less than $ 125,000 annually could get a 50% refund. Those with incomes between $ 125,000 and $ 440,000 could get partial credit.
Child care advocates are eager to see Biden change. “With the investments in early learning and tax credits included in the U.S. plan for families, there’s no doubt that President Biden understands that child care isn’t just a table-top issue. kitchen, but a vital pillar of the American economy, âsaid Sarah Rittling, executive director of the First Five Years Fund, which advocates for the issues of young children.
The plan has drawn resistance from Republicans, including some who have long championed family tax credits.
Senator Mitt Romney, R-Utah, supports a permanent extension of the child tax credit. Its âFamily Safety Actâ would provide a credit of $ 4,200 to qualifying families for each child under age 6 and $ 3,000 to those with children ages 6 to 17. entirely.
Romney told The Bee that he was “not in favor of a plan that expires like the president’s.” But, he added, âWe should be able to do that. We haven’t sat down yet and had a negotiation on this.
This story was originally published May 1, 2021 5:00 a.m.