{"id":109283,"date":"2021-03-11T14:26:15","date_gmt":"2021-03-11T14:26:15","guid":{"rendered":"https:\/\/fin2me.com\/?p=109283"},"modified":"2021-03-11T14:26:15","modified_gmt":"2021-03-11T14:26:15","slug":"4-big-changes-are-coming-to-the-child-tax-credit","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/4-big-changes-are-coming-to-the-child-tax-credit\/","title":{"rendered":"4 big changes are coming to the child tax credit"},"content":{"rendered":"<ul>\n<li>The $1.9 trillion Covid relief bill makes some big changes to the child tax credit.<\/li>\n<li>The American Rescue Plan increases its value, offers it for older kids and makes it fully refundable. Taxpayers can also get it in a regular income stream starting as early as July. The changes are temporary.<\/li>\n<li>The House passed the legislation Wednesday. President Joe Biden plans to sign it Friday.<\/li>\n<\/ul>\n<p>Families with kids \u2014 especially low earners \u2014 are poised to get a bigger break on their taxes next year.<\/p>\n<p>The $1.9 trillion American Rescue Plan, which President Joe Biden hopes to sign Friday, makes some big changes to the child tax credit.<\/p>\n<p>Those tweaks to the tax code include increasing the credit&#x27;s value, making it available to families with older kids and making it fully refundable. The funds would come in a regular income stream starting later this year, as opposed to a lump sum at tax time.<\/p>\n<p><strong>More from Personal Finance:<\/strong><br \/>First $1,400 stimulus checks will go to those with direct deposit<br \/>Health insurance costs set to drop under final Covid-relief bill<br \/>Here&#x27;s what The American Rescue Plan offers unemployed workers<\/p>\n<p>Americans would get a $2,700 tax cut, on average, as a result of the legislative changes, according to the Urban-Brookings Tax Policy Center.<\/p>\n<p>The bottom fifth of earners (Americans who make less than $25,500 a year) would get the biggest bump \u2014 a $3,800 increase, on average, according to the analysis. Ninety percent of the lowest earners would get a break. \u00a0<\/p>\n<p>By comparison, about 39% of wealthy families would see a benefit. The top 20% would get a $600 average tax cut, according to the Tax Policy Center.<\/p>\n<p>The relief measure&#x27;s changes are temporary. As of now, they would only be in place for a year. \u00a0<\/p>\n<p>Here&#x27;s what to know about the expanded credit.<\/p>\n<h2>Amount and age<\/h2>\n<p>A tax credit cuts one&#x27;s overall tax bill.<\/p>\n<p>Right now, taxpayers can claim a child tax credit of up to $2,000 per kid under age 17.<\/p>\n<p>The American Rescue Plan raises that to $3,600 for kids under age 6, and to $3,000 for older children.<\/p>\n<p>About 3 in 4 families with children will receive a larger tax credit than under current law, according to the Tax Policy Center.<\/p>\n<p>The legislation also expands the age of qualifying children by one year. It allows families to claim a credit for 17-year-olds, too.<\/p>\n<p>There are income limits on the child tax credit.<\/p>\n<p>The full tax break would be available to individuals who earn up to $75,000 a year; heads of household who earn up to $125,000; and married couples filing a joint tax return who earn up to $150,000.<\/p>\n<p>The credit phases out for higher earners.<\/p>\n<h2>Fully refundable<\/h2>\n<p>The relief measure also makes the tax break fully refundable.<\/p>\n<p>There are two types of tax credits: refundable and non-refundable.<\/p>\n<p>The child tax credit is a refundable credit. Taxpayers get a refund even if the credit exceeds their total tax bill. In other words, the refund doesn&#x27;t just zero out one&#x27;s tax liability \u2014 it also allows people to pocket the extra.<\/p>\n<p>Right now, the child tax credit is partially refundable. Taxpayers can only get back up to $1,400 total.<\/p>\n<p>Wealthy families, who tend to have larger tax bills, get the biggest benefit from this structure. They can generally claim the credit&#x27;s full value, whereas someone with no tax liability is capped at a $1,400 benefit.<\/p>\n<p>A single parent with one child must earn at least $25,000 a year to get the full $2,000 credit right now, said Elaine Maag, a principal research associate at the Tax Policy Center who studies income support programs.<\/p>\n<p>About 27 million kids live in households that don&#x27;t get the credit&#x27;s full value because parents&#x27; income isn&#x27;t high enough, she said.<\/p>\n<p>The American Rescue Plan makes the child tax credit fully refundable \u2014 meaning low earners would get more money back.<\/p>\n<h2>Income stream<\/h2>\n<p>Right now, the credit is available to taxpayers in a lump sum when they file their taxes (if they get a refund).<\/p>\n<p>The pandemic aid measure would turn the credit into a regular income stream for families.<\/p>\n<p>The periodic payments may start arriving as soon as July, according to the legislative text. Their frequency is unclear, but they may be monthly or quarterly, Maag said.<\/p>\n<p>The timeline depends on how soon the IRS is able to reprogram its systems to accommodate the tweak.<\/p>\n<p>&quot;A sustained payment to individuals and families is very different from how the IRS typically operates,&quot; Maag said.<\/p>\n<p>The income would technically be an advance on Americans&#x27; expected credit for the 2021 tax season. They&#x27;d get half of that credit in periodic payments this year, and the rest during tax season next year.<\/p>\n<p>The legislation directs the IRS to create an online portal allowing taxpayers to opt out of the regular payments. The portal would also let them change information such as family size.<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/03\/11\/covid-stimulus-update-the-child-tax-credit-is-getting-4-big-changes.html\" target=\"_blank\" rel=\"noopener noreferrer\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The $1.9 trillion Covid relief bill makes some big changes to the child tax credit. The American Rescue Plan increases its value, offers it for [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":109282,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>4 big changes are coming to the child tax credit - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/4-big-changes-are-coming-to-the-child-tax-credit\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"4 big changes are coming to the child tax credit - Fin2me\" \/>\n<meta property=\"og:description\" content=\"The $1.9 trillion Covid relief bill makes some big changes to the child tax credit. 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