If changes to the child tax credit put forward by Democrats stick, more children than ever will be eligible for the benefit.
One major change in the current proposal is allowing children with individual taxpayer identification numbers, or ITINs, to receive the credit. These kids, who are often undocumented children growing up in the U.S., were left out of the 2017 Tax Cuts and Jobs Act.
Thus, their parents have not been able to claim the child tax credit or receive monthly payments through the enhanced benefit, as only kids with Social Security numbers have been eligible.
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Including this provision going forward would restore the benefit to more than 1 million children, according to the Institute on Taxation and Economic Policy.
"These kids are who are in mixed immigrant status families will be able to benefit greatly from having these benefits just like all families," said Ashley Burnside, a policy analyst at the Center for Law and Social Policy. "When we provide families with this additional monthly income it allows them to afford basics like food, rent and school supplies."
A fully refundable credit
Another change that Democrats are looking to keep is full refundability. Previously, the credit was only partially refundable, meaning it would only offset taxes owed or be returned to the taxpayer in a refund if they had taxable income of about $2,500 or more on their return.
Making the credit fully refundable means that families with no taxable income, the very lowest-income ones, can receive the money. This change helped some 27 million children who previously got partial credit or missed out because their families didn't earn enough income.
"That really affects the lowest-income families, and the research showed that [partial refundability] was part of the policy that boxed out children of color," said Amy Matsui, director of income security and senior counsel at the National Women's Law Center. "It is incredibly important to have that be made permanent."
The American Rescue Plan in March expanded the existing child tax credit, adding advance monthly payments and increasing the benefit to $3,000 from $2,000 with a $600 bonus for kids under the age of 6 only for the 2021 tax year.
The first half of the credit is being delivered in monthly direct deposits through December of $300 for children under 6 and $250 for those aged 6 to 17. The second half will come when families file their 2021 tax returns next year.
Democrats are looking to extend the enhanced child tax credit with added benefits in the coming years in their $3.5 trillion budget plan. Of course, the changes that lawmakers have proposed so far are not set in stone. Details of the plan could change as lawmakers debate the specifics of the legislation.
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