The Biden-sponsored COVID-19 stimulus package — which was finalized in Congress with House passage of the Senate bill on March 10 – offers major (if temporary) new subsidies for families with children age 17 and under. The legislation offers two major avenues for assistance: stimulus checks and an expanded child tax credit. Eligible parents will receive up to $5,000 per child in 2021 via a combination of direct payments and tax credits in addition to their own third stimulus check. Here are the latest updates on what families can expect.
Third Stimulus Check: $1,400 Per Child
The final bill provides a third check (following the direct payments from the March 2020 CARES Act and the December 2020 partial stimulus bill) to low-to-moderate-income Americans in the amount of $1,400. That sum is designed to “plus up” the $600 second stimulus check to the originally planned $2,000.
The eligibility criteria for the third payment are essentially the same as they were for the first two checks, though there is a steeper phase-out and sharper cut-off for the higher tiers of middle-class families. Adults who earned $75,000 or less, married couples who earned $150,000 or less, and heads of household who earned $112,500 or less will receive the full check. The payment will then “phase out,” with adults who earned more than $80,000, married couples who earned more than $160,000, and heads of household who earned more than $120,000 receiving nothing. Eligibility will be based on 2019 or 2020 tax returns, (the latest the IRS has available).
Among fully qualifying families, the amounts can become pretty substantial, since children and even adult dependents will also be entitled to a $1,400 check (previous rounds provided $600 for kids and no money for adult dependents). For example, a family of four will receive $5,600, and a two-parent family with three kids and a dependent adult will receive $8,400.
Expanded Child Tax Credit: $3,000 to $3,600 Per Child
Unlike the first two pieces of stimulus legislation, the latest has a whole new chunk of assistance for parents, via a temporarily enhanced child tax credit.
Under current law, parents with adjusted gross incomes of up to $200,000 for individuals or $400,000 per couple (with smaller amounts phased down for those with higher incomes) can receive a tax credit of $2,000 per child up to their entire federal income tax liability, and a bit beyond ($1,400 in credits can be “refunded” via a payment to parents).
The new stimulus bill boosts the credit significantly for one year (tax year 2021) for people with essentially the same incomes as those qualifying for the full stimulus checks. The enhanced amount totals $3,600 per child under the age of 6, and $3,000 per child aged 6 through 17.
In addition, the enhanced credit will be fully refundable, meaning recipients will get the full amount by check for any portion not used to offset federal income tax liability. And in a final wrinkle, which may only be clarified in regulations, the bill authorizes the IRS to make advance “periodic” payments of the credit possible beginning in July, so that families don’t have to wait on filing a 2021 tax return next year, and then wait on the refund.
The Bottom Line
Parents who are eligible for both stimulus checks and the enhanced child tax credit should see direct assistance in 2021 of between (depending on the age of their children) $4,400 to $5,000 per child. That’s in addition to their own $1,400 stimulus checks, plus a stimulus check for any adult dependents.
The timing of the assistance is a bit tricky. Stimulus “checks” in the form of direct deposits should be paid very soon now that the bill has been enacted, with paper checks and debit cards going out not too long thereafter. The child tax credit will be taken in conjunction with the filing and payment of 2021 taxes, except for those receiving “periodic” payments made beginning in July.
Many Democrats hope that the child tax credit enhancements can be made permanent in separate legislation later this year. The Biden administration claims this amount of assistance could cut child poverty in half.
Other Assistance for Parents
Less direct and tangible — but vitally important to some parents — are provisions in the bill aimed at boosting the supply of child-care resources, improving access to affordable health care, and helping reopen schools. And some families, of course, will benefit from supplemental federal unemployment insurance, housing assistance, small-business loans, and other items in the overall package. There’s a reason Republicans consider this legislation too generous, even as advocates for America’s struggling families fear it won’t be enough.
