Child Tax Credit Payments Begin As Some Democrats Press To Keep Sinking
WASHINGTON – Tens of millions of U.S. households can expect their bank balances to rise on Thursday, thanks to the first monthly payments of the Expanded Child Tax Credit.
The Internal Revenue Service has provided families with payments of up to $ 300 per child as part of a program to tackle child poverty and turn lump-sum annual tax refunds into predictable income for them. households. The Biden administration said it paid around $ 15 billion, mostly through direct deposits, to families with nearly 60 million children. These monthly payments will continue until December and Congress is considering whether to continue them.
Congress expanded the credit by about $ 100 billion under the March coronavirus relief bill. The credit was worth up to $ 2,000 for children 16 and under. Now it’s worth $ 3,000 for kids ages 6 to 17 and $ 3,600 for kids under 6.
The expanded portion of payments begins to decline once income reaches $ 75,000 for an individual and $ 150,000 for a married couple. Households above these levels still benefit from the $ 2,000 credit, which retains previous income cuts starting at $ 200,000 for individuals and $ 400,000 for married couples.
The credit is also now fully refundable, meaning low-income families qualify even if they don’t owe income tax. Prior to this year, only $ 1,400 of the $ 2,000 was repayable.
The Biden administration and Congressional Democrats, who extended credit in March and insisted on the monthly payment feature, hope regular money transfers can build support for the program beyond its scheduled expiration at the end. of the year. Republicans, who expanded credit in 2017 but didn’t add monthly payments, have been lukewarm, criticizing Democrats’ decision to make full credit available to families even if they don’t have earned income.
“It’s a day worth celebrating, but let it be just the start,” said Rep. Rosa DeLauro (D., Connecticut), a long-time credit widening advocate.
She and other progressives want to make the expansion permanent, but they are being opposed by moderates worried about the size of the legislation Democrats are trying to pass later this year.
President Biden, who will speak on credit on Thursday, has proposed an extension to 2025, but a Senate budget framework only assumes an extension until 2024, people familiar with the plan have said.
The monthly payment feature is the one households will notice first, and advocates are trying to make sure they get as much eligible persons registered as possible, using tools on the IRS website. Households will receive one-twelfth of their planned annual amount each month.
For some households, including high-income families and those without custody of the children this year, the monthly payments could result in lower tax refunds or unexpected tax bills at the start of the year. next. Taxpayers can opt out of the monthly payments and claim the credit on the tax return if they prefer and about a million have already done so.
Others, especially low-income households, will come out ahead, receiving more money and sooner.
The monthly payments mark a shift in the way lawmakers deliver aid to households, moving towards regular, flexible cash with fewer terms.
“We trust these families. We provide the dollars, ”said Sen. Sherrod Brown (D., Ohio). “They make choices about what is best for their family.”
Over time, Congress built more employee benefits into the tax code. This is in part a recognition that this can be effective, as the IRS already has information on income, household, and bank account.
SHARE YOUR THOUGHTS
Is expanding the child tax credit the best way to fight child poverty? Why or why not? Join the conversation below.
But loading the benefits into the tax code usually means distributing them through the annual tax refund. Many households use these repayments to make major purchases or to pay off debt, and families often plan their budgets around them. Repayments can be a form of saving for big expenses, but they can also lead to peaks and troughs in household income.
“It’s good to give people more options and give them the choice to get [payments] month by month when child care costs tend to go up, ”said Jacob Goldin, who teaches law at Stanford University and studies low-income household taxation. “The hope would be that there would be less need to have so much debt during the year.”
The monthly payments could also have a political benefit, Goldin said, as it could strengthen support for the child tax credit as something other than a line on the tax return as part of a refund. global.
“Once they start receiving checks each month,” he said, “I think they will appreciate the [credit] as its own program.
—Andrew Duehren contributed to this article.
Write to Richard Rubin at [email protected]
Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8