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The new act also enables unemployed individuals to access the Child Tax Credit.
On Saturday 6th March, the United States Senate voted to pass the American Rescue Plan Act worth $1.9 trillion. Under the act, Child Tax Credit (CTC) will increase to $3000 for each child aged 6 to 17 and $3600 for each child aged 5 and under per year in the US. The child tax credit applies to families living in both the United States and U.S territories.
According to the Act, the Internal Revenue Service (IRS) could start rolling out periodic $250 payments by July. The Treasury Department will determine what course of action will be most effective. It is hoped that eligible families will receive about half of their child tax credit by the end of the year. They can then claim the rest on their 2021 tax returns.
Families with children aged 17 and below are eligible if a married couple that earns no more than $150,000 per annum files jointly. The same applies to individuals with children of eligible age earning $75,000 per year.
For those earning more than $75,000 as individuals and $150,000 jointly, $50 will be deducted from the credit for every extra $1000 of adjusted gross income (AGI).
This translates into a total phasing out of the $3000 credit for parents who earn $95,000 as individuals and $170,000 jointly.
Families rendered thus ineligible can still claim the $2000 per child credit. This credit is accessible to individuals earning up to $200,000 and $400,000 for those filing jointly.
The new CTC is a step up from the current one in which individuals can only get up to $1400 as a refund if their credit exceeds their taxes. Under the new act, CTC is fully refundable.
The new act also enables unemployed individuals to access this credit. Previously, only those earning a minimum of $2,500 could access it. This meant households with a very low income had no access to full credit.
In a statement issued by the White House on Saturday President Joe Biden said:
“This nation has suffered too much for much too long. And everything in this package is designed to relieve the suffering and to meet the most urgent needs of the nation and put us in a better position to prevail.”
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