The expansion of the child tax credit for one year under the American Rescue Plan excites District leaders who view the measure as a way to improve life for the city’s indigent children and provide a tax break for parents that will help reduce liability and possibly increase refunds for the 2021 tax year.
“I really think President Biden and the Congress did the right thing by supporting the bill,” Robin McKinney, the advisory neighborhood commissioner for district 8A06 in Ward 8, told The Informer. “This will help mothers and parents throughout the city raise their children and pay their bills.”
McKinney lives the ward with the highest percentage of children in the District. Ward 8 also has the highest child poverty rate, 43 percent, according to 2019 statistics from DC Action for Children.
Experts speculate the new child tax credit under the American Rescue Plan (ARP) can aid struggling families, benefitting single parents such as McKinney.
The Tax Credit
The provisions of the American Rescue Plan, signed into law by President Biden, temporarily increases the $2,000 credit taxpayers can claim for children under the age of 17 to $3,000 for the 2021 tax year.
The credit begins to phase out, Kiplinger.com says, for taxpayers with an adjusted gross income above $400,000 on a joint return or over $200,000 on a single head of household. Up to $1,400 of the child credit is refundable for some lower-income people with children.
The $2,500 earning level has been removed and the credit is now fully refundable.
Half of the credit can be received in advance by requesting the IRS send periodic payments to families from July to December 2021, according to Kiplinger.com.
However, the enhanced tax relief phases out for those with average gross incomes of above $75,000 on single returns, $112,500 on head-of-household returns and $150,000 on joint returns. Nevertheless, families who don’t qualify for the higher child credit could still claim the normal credit of $2,000 per child, less the amount of any monthly payments they got, subject to the $400,000/$200,000 adjusted gross income threshold limits.
Child Credit Measure Praised
The Rev. Dr. Starsky Wilson, president of the Children’s Defense Fund, praised the credit “as a valuable step forward along the path to end child poverty in America.”
“The bill’s [ARP] inclusion of a one-year expansion of the child tax credit will change the lives of 23 million children who previously did not benefit from the program because — oddly — their families earned too little,” Wilson said.
“The bill could also go a long way in reducing racial and economic inequity…The cash benefit will cut child poverty in half and more than half for Black children. Increasing the benefit for children and providing it on a monthly basis during the year makes it easier for all families to meet the everyday expenses of raising children and increases family income security. It will help to meet our obligation to make sure our children flourish no matter their color or zip code.”
While applauding the new law, he said the guaranteed monthly child allowance must become permanent to financially stabilize struggling families.
McKinney also hailed the ARP as a tool to help her as a working mother.
“This is good for me because I don’t qualify for a housing voucher and I don’t get benefits such as food stamps,” she said. “My children are really costing me money now. They aren’t in school but they eat a lot of food and being at home, they are using a lot of electricity. I want to be able to feed my children healthy food, not just fried chicken and French fries with mumbo sauce on a regular basis, but I need money to do that. This tax credit will make things easier for me.”