Earlier this year, the American Rescue Plan increased the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) amounts, lifting 1.3 million Latino children in the U.S. out of poverty and benefitting many childless low-to middle-income workers. Now, the Build Back Better Bill may extend the same benefits, if passed by Congress. Here’s what to know:
How did the child tax credit change in 2021?
Back in March, the American Rescue Plan increased the child tax credit from $2,000 per child to $3,000 per child between the ages of 6 and 17 or $3,600 per child under age 6. The requirements to receive this credit also broadened to include more families by eliminating the minimum income requirement, and raising the qualifying age for children up to 17.
The plan also sent out monthly payments from July 2021 to December 2021, ensuring that families wouldn’t have to wait until early 2022 to receive payments.
How did the earned income tax credit change in 2021?
The American Rescue Plan extended the EITC, to more childless workers aged 19 to 24 and 65 and over, also raising the maximum qualifying income to $21,430 for single filers and $27,380 for couples.
The maximum amount of this credit was temporarily increased by almost triple to $1,502.
Additionally, undocumented parents of citizen children were eligible to receive this benefit, if they had an ITIN number.
How do families benefit from these increases and changes?
The child tax credit expansion decreased the child poverty rate in the U.S. by 25%. According to the U.S. Department of Treasury, the initial monthly payment in July reached more than 59 million children.
These changes in benefits put cash in the hands of people who wouldn’t have received them otherwise. People who had never previously been required to pay taxes due to low income received these benefits for the first time.
After record job loss and mass financial hardship in 2020, these payments helped families get back to work, alleviate hunger, pay bills, and build financial security.
How are these benefits included in the government’s proposal?
If passed, The Build Back Better Act would include a one-year extension to the enhanced CTC and EITC benefits of 2021. Senate Democrats are pushing to pass the BBB by the end of the year, but could be forced to wait until 2022.