President Joe Biden’s $1.9 trillion American Rescue Plan, which he signed into law in March 2021, provided an interim remedy in the form of those checks. The economic aid package increased the child tax credit from $2,000 to $3,000 per dependant aged 6 to 17 and from $2,000 to $3,600 for children aged five and under for one year. In contrast to past years, up to half of that money might be received early through monthly $250 or $300 tax advances (a.k.a. cheques) paid between July and December.
Eligible parents who got monthly advances will still be able to claim up to half of the entire credit when they file their 2021 tax returns this year.
But what will take the place of the dwindling benefit? The 2022 child tax credit (which you would receive if you filed in 2023) is currently slated to return to $2,000 for each dependant age 17 or younger. The benefit is due to return since Congress did not extend either the increased benefit or the monthly payments.
However, the IRS has yet to reveal the income thresholds for the 2022 benefit. Not to add, Congress still has time to act before the child tax credit reverts to its pre-2020 payout level.
Democratic leadership is still pushing for the passage of the Build Back Better plan, a reconciliation package that has been in the works for almost six months. The plan, in its current form, would extend the 2021 child tax credit by another year. However, centrist Senator Joe Manchin (D-WV) remains opposed to both the bill’s size and the notion of extending monthly child tax payments. Passing a reconciliation measure in the face of unanimity among Republicans would need the backing of every Democratic senator. After all, Democrats only have a 50-50 divided chamber because of the vice president’s tie-breaking vote. As a result, Democratic leadership is unlikely to approve the package without Manchin’s backing.
Before officially opposing the plan, Manchin allegedly informed the White House that he would support the continuance of the monthly child tax credit payments provided it contained a “work condition” for parents and restricted payments to households earning less than $60,000.
Millions of Americans would lose out if Manchin’s $60,000 income restriction became law.
This year, single filers with a modified adjusted gross income of less than $75,000 and couples filing jointly with a combined income of up to $150,0000 received increased child tax credits ($3,000 for children ages 6 to 17, and $3,600 for children ages five and younger). Earners earning more than that might still receive a $2,000 credit; however, they were phased out at an income of more than $200,000 per single filer and more than $400,000 per family.
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