House bill

Bill makes child tax credit fully refundable, a boon for low-income earners

House Speaker Nancy Pelosi, D-Calif., Speaks at a press conference, with House Democratic leaders, after the House passed the Build Back Better law on November 19, 2021.

Anna Moneymaker | Getty Images News | Getty Images

The House of Representatives passed legislation on Friday that would make the child tax credit fully refundable on a permanent basis, a change that would be especially significant for low-income families.

The Build Back Better Act, which Democrats passed by a vote of 220-213, would also preserve some temporary credit improvements for a year, until 2022.

The American Rescue Plan, which President Joe Biden signed in March, made the parent tax credit fully refundable. This means that low-income people would get the full value of the credit, regardless of their income or tax payable.

The House’s $ 1.75 trillion law would make it a permanent feature of the tax code – which experts say would especially help low-income parents and reduce the number of children living in poverty.

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Prior to the pandemic relief law, low incomes could only get part of the tax break (up to $ 1,400) as a refund, while high incomes would get the full value. They were also not eligible for the credit if they earned less than $ 2,500 per year.

The Build Back Better Act – said to be the biggest expansion of the social safety net in decades and the biggest effort in U.S. history to tackle climate change – is now before the Senate for consideration.

Temporary changes

The legislation made other changes which, unlike full reimbursement, would be temporary.

The enhanced value of the child tax credit would be extended for one year, until 2022. Parents would get up to $ 3,000 per child under 18 and $ 600 more per child under 6 .

The American Rescue Plan temporarily increased the maximum credit value by $ 2,000 per child to its current level and increased the number of households eligible for tax relief.

The pandemic law also allowed families to receive the funds in monthly installments this year, up to $ 300 per child. The Build Back Better Act would continue in 2022.

The federal government issued $ 77 billion in total monthly payments from July to November of this year, according to the Treasury Department.

However, unlike 2021, these deposits would be reserved for families based on income. Monthly payments would be available for taxpayers with incomes of less than $ 150,000 (for married taxpayers filing a joint tax return), $ 112,500 (for heads of households), and $ 75,000 (single filers).