What you need to know about the new child tax credit stimulus

Biden's stimulus package seeks to address these problems 1:53

(CNN) -

The $ 1.9 trillion aid package signed by President Joe Biden vastly improves the federal child tax credit for one year, allowing millions more families to benefit and take millions of children out of poverty.

The stimulus package increases the size of the credit, makes it fully refundable so more households can qualify, and requires it to be sent in periodic payments rather than included in regular tax-time refunds - a dramatic change designed to help families. to pay your bills.

Some Democrats are already pushing for the more generous credit to be permanent, noting how much it would help poor children.

However, that would be costly.

The one-year improvement is projected to cost $ 110 billion, according to the Committee for a Responsible Federal Budget.

Making that permanent is estimated to cost more than $ 1 trillion over a decade.

Here's how the Democrat-backed aid package changes the child tax credit this year:

How much will you receive?

The increased child tax credit will give eligible parents a total of $ 3,600 for each child under age 6 and $ 3,000 for each child under age 18 by 2021.

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Until now, the credit was only US $ 2,000 per child under the age of 17.

It is projected that 90% of families with children will receive an average credit of $ 2,380 in 2020, according to the Tax Policy Center.

Who is eligible?

The enhanced portion of the credit begins to be phased out for single taxpayers with annual incomes over $ 75,000, heads of households earning more than $ 112,500, and joint taxpayers earning more than $ 150,000.

The existing credit of $ 2,000 is phased out for single taxpayers and heads of household who earn more than $ 200,000 a year and married couples with incomes of more than $ 400,000.

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What if your income is low?

A key feature of the stimulus package is that it makes the child tax credit fully refundable so more low-income families can benefit.

Until now, if the credit exceeded the taxes owed, parents could only receive up to $ 1,400 as a refund.

These households must also have earned income of at least $ 2,500.

About 23 million children live in low-income families who have received partial or no credit, according to the Center on Poverty and Social Policy at Columbia University.

Parents with no income or income below the required filing threshold must file tax returns this year to receive the new payments as soon as they begin to be distributed.

When will you receive the credit?

The answer depends on how quickly the Internal Revenue Service can implement the new provisions of the bill, which Biden signed in early March.

The enhanced child tax credit is just one of several relief measures the understaffed agency must implement this year.

Families could receive half of their total credit periodically, up to US $ 300 per child up to 6 years old and US $ 250 per child between 6 and 17 years old, starting in July and until the rest of the year, according to the legislation.

Then they could claim the remaining half on their 2021 tax returns.

But the provision gives the agency some leeway: The Treasury secretary could order payments to be issued as often as possible if a monthly schedule is not feasible.

Typically, families receive the credit once a year at tax time.

Those who want to receive periodic payments this year must file returns for 2020 as well as 2021.

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Who will benefit?

The expanded credit will lift 4.1 million children above the poverty line, reducing the number of children living in poverty by more than 40%, according to the left-leaning Center for Budget and Policy Priorities.

In addition, it will lift 1.1 million children out of "extreme poverty", which is below half the poverty line.

The new provisions will benefit children of color, in particular.

Half of all black and Latino children in the United States were unable to receive full credit so far, according to the center.

In total, the stimulus package would cut child poverty by more than half, a statistic Biden frequently cites.

The plan also provides stimulus payments of US $ 1,400 and temporarily improves unemployment benefits and food stamps, among other measures.

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