Child Tax Credit Would Go Up Under Biden Proposal
Some families would see their tax credit jump from $2,000 to $3,600 per child under Joe Biden's plan. But there are a couple of important catches.
President Trump is hammering away at Joe Biden's proposed tax increases every chance he gets. At his campaign rallies, the president often notes that Biden is going to "impose $4 trillion in tax hikes." But Biden's tax proposals also include a number of middle-class tax cuts. In fact, the Democratic challenger's latest idea is to significantly increase and expand the child tax credit, which is an important tax break for ordinary Americans.
However, Biden's child tax credit plan comes with a few catches: it's only temporary, the biggest increases only apply to certain children, and some people don't qualify for the credit.
Current Child Tax Credit Rules
Right now, parents can claim a $2,000 tax credit for each child age 16 or younger. The credit begins to disappear as income rises above $400,000 on joint returns and above $200,000 on single and head-of-household returns—although there's no limit to how many kids you can claim on a return, as long as they qualify.
For some lower-income taxpayers, the credit is "refundable" (up to $1,400 per qualifying child), meaning that if it's worth more than your income tax liability, the IRS will issue you a check for the difference.
Under the Biden plan, the child tax credit would increase to $3,000 per child for kids six to 17 years of age and to $3,600 for children under six. So, not only will the amount go up, the upper age limit for qualifying children would jump from 16 to 17 years of age—meaning more money for more families.
Biden would also make the credit fully refundable and allow families to receive the credit in monthly payments, instead of having to wait until they file their next tax return to benefit from the credit.
Limitations to the Biden Plan
There are a few limitations worth noting (we're being picky). First, enhancement of the child tax credit would only be temporary under the Biden plan. It would kick in for 2021, but then only last "as long as economic conditions require." It's only designed as a measure to help families struggling financially during the coronavirus pandemic; the changes would not be permanent.
You probably also noticed that the highest credit amount ($3,600) is only for kids five and under. Presumably, this is to help cover the cost of pre-school childcare. While parents with children ages six to 17 would still get a larger tax credit ($1,000 more per child), families with a child turning six years old next year are going to be very disappointed—they'll just miss the extra $600 payment if Biden's plan is enacted. (But parents with a 16-year-old kid this year will be very happy to get the credit—at a higher amount—for an extra year.)
Finally, the Biden plan doesn't adjust the phase-out thresholds. So, joint filers with income of at least $400,000 and others with incomes above $200,000 will still miss out on the credit. That actually fits in with Biden's overall tax strategy of making wealthier Americans pay more and providing some tax breaks for lower- and middle-income taxpayers.