$3,000 child tax credit: Here’s what parents need to know
WASHINGTON - The buzz around the $1.9 trillion coronavirus relief plan recently passed by the U.S. Senate has been mostly surrounding the $1,400 direct payments to most individual Americans.
But included in the historic bill is a plan to temporarily raise the child tax credit that could end up permanently changing the way the country deals with child poverty.
The American Rescue Plan temporarily raises the child tax credit, now at a maximum of $2,000, to as much as $3,600 per child annually. The plan also expands the credit so it’s fully available to the poorest families.
What is the $3,000 child tax credit?
According to the Brookings Institute, the child tax credit was first written into law in 1997 under President Bill Clinton including a $500-per-child, non-refundable tax credit. Its passage into law was a means by which the federal government hoped to aid low-income families with children.
In 2001, Congress enacted the Economic Growth and Tax Relief Reconciliation Act, which doubled the child tax credit at the time to $1,000, making it partly refundable.
Congress then passed the 2017 tax revision, expanding the credit to $2,000.
Who will benefit from the child tax credit?
According to the Joint Committee on Taxation of Congress, roughly 48 million households are expected to claim the child tax credit for 2020.
Assuming President Joe Biden signs the stimulus plan into law, the legislation expands the child tax credit, giving families up to $3,600 annually for each child under age 6 and as much as $3,000 for those up to 17.
The credit starts to phase out for individual parents earning more than $75,000 and couples making $150,000. The legislation also expands the credit to millions of families currently making too little to qualify for the full benefits.
Families could also opt to receive monthly payments – roughly $250 to $300 – instead of an annual lump sum. Payments would begin going out in July if Congress approves the relief plan, as it's widely expected to do.
The benefit is aimed at providing support to millions of families affected by the coronavirus pandemic, with parents forced to cut down on work or give up their jobs entirely to take care of children after losing access to childcare. Democrats have embraced an analysis that found the proposal would cut child poverty among Black families by more than 50%, and by 45% overall.
A separate survey by the U.S. Census Bureau found that about 13% of families with children said they sometimes or often did not have enough to eat in mid-January.
The cost of the $3,000 child tax credit
A year-long expansion of the tax credit will cost about $109 billion, according to an analysis from the Joint Committee on Taxation, a nonpartisan congressional body, meaning that making it permanent could as much as $1 trillion over the next decade.
Still, some GOP lawmakers, including Sens. Marco Rubio, R-Fla., and Mitt Romney, R-Utah, have previously supported bolstering the child tax credit and have laid out differing plans on how to do so. But Rubio recently slammed Democrats' "corrosive" proposal, warning that "no strings attached" money does little to address the root causes of child poverty.
FOX Business and the Associated Press contributed to this story.