WASHINGTON—Democrats are poised to pass a significant—but temporary—expansion of the child tax credit as part of President Biden’s coronavirus relief package. Here’s a guide to the credit and the proposals to expand it.
What is the child tax credit?
It is a tax break for having and raising children.
Currently, parents can subtract up to $2,000 per child from their income taxes, following an expansion in the 2017 tax law. Parents of children under age 17 are eligible for the credit, which starts phasing out once income reaches $200,000 for individuals and $400,000 for married couples.
The credit isn’t a deduction, because it reduces the tax you owe dollar-for-dollar as opposed to reducing taxable income. So as a share of income, the credit becomes less valuable as income rises.
Some low-income families face limits on the credit, and that means 27 million children don’t get the full benefit, according to the left-leaning Center on Budget and Policy Priorities. The credit increases along with wages for low-income households, and only $1,400 is fully refundable, or payable even if someone doesn’t owe income taxes.
Source: WSJ – US News