Child vs. child care tax credits: the money parents could receive

Washington-DC

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(NEXSTAR) – While stimulus checks may get most of the headlines from the sweeping stimulus bill Democrats are pushing through Congress, families with young children may actually be in line for some additional relief โ€“ and another set of checks โ€“ from relief proposals in the package.

For those who only pay attention to their taxes on April 14th, two big direct benefits for parents might be confusing. The vote in the House of Representatives advanced expanded benefits for most parents and an additional boost for those who pay out of pocket for childcare in order to work.

Child Tax Credit

As you may know from your annual tax preparation, parents of children 16 or younger are already able to reduce their federal income tax by as much as $2,000 per child. But that number โ€“ and the age cap โ€“ could grow.

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The Dems’ proposed child tax credit adjustments include increasing the benefit from $2,000 per child to $3,000 per child this year. Parents of children under age 6 would be eligible for an even larger $3,600 payment. The plan would also include $3,000 benefits to the parents of 17-year-olds who meet plan qualifications.

The proposal could also lead to new checks. In order to get the cash to families faster, Democrats want payments to be delivered monthly in advance instead of one big chunk at tax-filing time. According to CNN, that could mean monthly payments to parents beginning in July.

But as with original stimulus checks, high-income earners will not see all the benefits. The phase-out for the credit in 2020 was a household income above $400,000 for married filers. The proposed increases are expected to begin phasing out for families earning above $150,000. People over that threshold should not see less benefit than in 2020, but they wonโ€™t see the full increase offered to lower-income parents.

The Associated Press reports families would get the full credit regardless of how little they make in a year, leading to criticism that the changes would serve as a disincentive to work.

Child Care Tax Credit

President Biden’s American Recue package provides additional grants to K-12 schools and child care centers to help adapt to COVID era needs, but it also aims to make covering the out-of-pocket costs easier on parents.

“President Biden is calling on Congress to expand child care tax credits on an emergency basis for one year to help working families cover the cost of childcare. Families will get back as a tax credit as much as half of their spending on child care for children under age 13,” reads the Biden plan.

That means families could see thousands in additional credits – depending on their expenses – topping out at $4,000 for a single child and $8,000 for two or more. Previous IRS limits were $3,000 and $6,000 respectively.

Like the child tax credit, the child care credit will be refundable, meaning it will still benefit those with low tax liability, and again, the added benefits start phasing out for high income families.

Republicans in Congress remain heavily opposed to the scale of the spending proposal, but the passage of the measures through the budget reconciliation process means Democrats likely don’t need to win bipartisan support.

Democrats hope to clear the final relief package through both houses by mid-March when some existing stimulus measures are due to expire.

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