Here’s the good news about the Democrats’ $1.75 trillion compromise plan, the summary of which was released on Thursday. The latest update to the child tax credit we have is that the spending accounts framework includes an expanded version of the credit for another year. That means that, in addition to the monthly incentive checks next year, families will also receive the second half of their 2021 child tax credits the moment they file their federal income tax returns.
Plans can of course still change. Passage of the bill in its current form is not guaranteed. And to win a sufficient number of Democrats in the House — not to mention 50 in the Senate, plus Vice President Kamala Harris’ casting vote — parts of the bill could be scrapped. Or change significantly.
Child Tax Credit Update
For now, let’s take a look at where we are and then see what this update means.
In just over two weeks, the fifth of the six child discounts in the currently approved series of payments will go out. The November 15 scheduled check is the penultimate payment, as the sixth and final check is currently scheduled for December 15. Including the child tax credit check conducted earlier this month, the IRS and the US Treasury Department sent $60 billion to more than 36 million households so far.
The six checks receiving families this year add up to half of their full annual payment. The other half will come in the form of a tax credit in 2022. Families will receive the second half when they file their tax returns next year.
2021 spending account
President Biden had wanted to extend this tax credit permanently, if not at least bring about a multi-year extension. Stop and think for a moment about what that means. Millions of American families would receive a check for several hundred dollars each month from the federal government, in a massive expansion of the social safety net.
What now seems to be taking shape, however, is a one-year extension of this benefit. A benefit, by the way, that has already transferred tens of billions of dollars from the federal government’s coffers to American families.
As a reminder, the $1.9 trillion stimulus bill earlier this year expanded the child tax credit from $2,000 to $3,000 for each child in a household ages six to 17. For each child under the age of six, the credit is $3,600. The full credit goes to married couples with up to $150,000 in adjusted gross income. And single-parent families with incomes up to $112,500 also get the full credit.
But if things stay on their current course next year? There’s actually a scenario where some families get $7,200. For various reasons, some families have not yet started receiving the child tax credit this year. They may not have taken some of the steps required by the IRS, such as making sure the most recent bank and/or mailing address information is on file.
Whatever the reason, that will provide a potentially interesting scenario next year. One where these families will essentially receive a double dose of child discount in 2022. Again, as long as the current details don’t change.