A child tax credit (CTC) is a government program aimed at supporting poor families with dependent children. Families who earn less than a certain amount per year can claim a child tax credit.
President Joe Biden expanded this policy this year as part of his American Rescue Plan Act (ARP). Previously, families were allowed to offset the child tax credit of $ 2,000 per child up to age 17. However, in 2021, families are allowed to compensate $ 3,000 per child up to age 18 and $ 3,600 per child under age 6.
The plan made the credit fully refundable, and families will have the option of receiving half of the child tax credit in six-month installments. The program covered nearly 39 million households and 88% of children in the United States. However, the policy extension is only valid for this year.
The program has made a tremendous contribution to eradicating child poverty. A study released by the Urban Institute shows that if the government also expands the program next year, it will significantly reduce child poverty in most parts of the United States. In 2016, the Child Tax Credit succeeded in reducing poverty for 3 million people. children.
Extending the policy to next year will reduce child poverty by 26%, according to a Columbia University publication.
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Discussions continue among Democrats to extend the child tax credit. Biden and Democrats in Congress are doing their best to kick-start politics.
Yes Rebuild it Better The law is passed in parliament, it will extend the Child tax credit boost until the end of December 2022, but with few changes.
Consider the changes proposed in the Rebuild better Law and their impact on the taxpayer.
To understand the changes that will occur in 2022, let’s first understand the changes that will occur in 2021.
Changes to the Child Tax Credit in 2021
From 2018 to 2020, compensation was $ 2,000 per child for children up to 16 years of age or under under the Child Tax Credit.
However, in 2021, the compensation was increased to $ 3,000 for children aged 6 to 17 and to $ 3,600 for children aged five and under.
Potential changes to the child tax credit in 2021
The first major change in the Child tax credit in 2022 is the increase in monthly payments. In 2021, the beneficiary was entitled to half the amount in six monthly installments starting from July to December. Later, the recipient will get another half in 2022.
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Whereas, in the proposal for 2022, the beneficiary will get the full repayment in 12 installments, from January to December.
- Decrease in the number of people eligible for monthly payments
Previously, single tax filers totaling $ 200,000 and married couples totaling up to $ 400,000 were eligible for the program. But, in 2020, the government changed the revenue cap.
If the bill is passed, the adjusted gross income (AGI) will be $ 75,000 for single filers, $ 112,500 for heads of household and $ 150,000 for joint filers will be eligible for said scheme.
- No need for a social security number
Previously, a child who did not have a social security number was not eligible for the child tax credit. When a person files an income tax return, it is essential to file their child’s social security number to benefit from the device.
The social security number system came into effect in 2018. However, a child’s social security number is not required under the current proposal for 2022. This amendment will help non-citizens to benefit from it. a children’s credit system.
There was a partial refund of the child tax credit until 2020. The beneficiary only received an amount of $ 1,400 per child. In addition, to obtain the benefit, the taxable person must have at least $ 2,500 as earned income.
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However, the government lifted the cap on earned income in 2021. It also made the child tax credit fully and fully refundable. The current proposal under consideration will Child tax credit fully refundable on a permanent basis. However, there is a condition attached to it.
The eligible person must be a resident of Puerto Rico or have lived in America for more than six months.
Lawmakers have suggested the said changes may not apply until 2022 in order to reduce costs and strain on the economy. However, others insist on the applicability of the extension until 2025.