Action Alert: Urge Legislators to Make the CTC Expansion Permanent
Two critical programs that provide financial support to low-income parents and caretakers are the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). These working-family tax credits lifted 5.6 million people out of poverty in 2018, including 3 million children, and made 16.5 million other people less poor.
The Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) are two of our tax code’s most effective income boosters for working families. These tax credits help everyday families that face the stress of flat wages handle the rising costs of childcare, healthcare and more. Recent research suggests that income from these credits leads to benefits at virtually every stage of life, including improved school performance, higher college enrollment, and increased work effort and earnings in adulthood.
What is the Difference Between the EITC and the CTC?
The Earned Income Tax Credit (EITC) is a federal tax credit for low-income working people that encourages and rewards work by offsetting federal payroll and income taxes; the Child Tax Credit (CTC) helps working families offset the cost of raising children by providing working families with payments per eligible child.
The American Rescue Plan has temporarily increased the Child Tax Credit from $2,000 per child to $3,000 per child for children over the age of six and from $2,000 to $3,600 for children under the age of six, and has raised the age limit from 16 to 17. This is an excellent first step as it provides the largest child tax credit ever and historic relief to the most working families in history.
What is the Child Tax Credit (CTC)?
The Child Tax Credit (CTC) is a credit that helps people who are working and raising children. Those eligible will receive a larger tax refund or will have to pay less in federal taxes.The CTC is for working parents (or other caretakers such as grandparents, relatives, or foster parents) who are raising one or more children on an income below certain federal limits. Eligible individuals must file their taxes to receive the CTC, but many people who qualify for the CTC (and other refundable tax credits) often miss out on the credits that are intended for them. For details about the CTC and additional credits, visit the IRS resource “What You Need to Know about CTC, ACTC and ODC“.
What is the Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit (EITC) is designed to support working parents and individuals who earn between $15,820 and $50,954 a year; they must also have investment income of less than $3,650. In 2020 there were approximately 25 million eligible working parents in the U.S. that received about $2,461 each.
The EITC payment made to eligible families depends on three criteria: the amount earned from working for someone (or for yourself); marital status; and the number of qualifying children. For more information on eligibility visit www.IRS.gov/eitc.
If you qualify for Federal EITC, you may also qualify for a similar credit from your state or local government. The various states that provide these additional tax credits are listed here: 30 States and Local Governments with Earned Income Tax Credit. The IRS also offers Free Tax Return Preparation for qualifying taxpayers (more information here). Note that the payee is responsible for the accuracy of the return. If you pay for help, that person must enter his or her Preparer Tax ID number on the tax return form. (PTIN)
Join Us in Urging Legislators to Make the Child Tax Credit (CTC) Permanent
In March of 2021, lawmakers enacted the American Rescue Plan which temporarily expanded the benefits of the CTC through December 2021. By making a significant set of changes to the Child Tax Credit, the American Rescue Plan is set to drastically reduce the number of children living in poverty. The CTC benefits the poorest among us, including our indigenous families, but currently the benefit extends for only one year. Permanently enacting these benefits should be an urgent priority.
Please tell your legislator to make these benefits permanent. If made permanent, these benefits will cut the number of children in poverty by more than 40 percent. Let your legislators know that we care deeply about the most vulnerable among us.
The expanded CTC benefit will equate to roughly $3,600 per year, per child, aged 0-6, and $3,000 per year for children aged 6-17. Families will get this increased CTC benefit in monthly payments from July to December 2021 and will get the final payment when they file their taxes in July of 2022. For eligible individuals, this final payment could be at least $1,500.
Married couples earning $150,000 annually or less are eligible for this benefit. A child or children must live with the U.S. adult for more than 6 months of the year to be eligible for the CTC. If a child has a social security number, and the parents have individual ID numbers (ITIN) and meet income requirements, they can receive the credit.
CTC payments are distributed by the IRS which uses the banking service information they have on file to distribute payments. An estimated 90% of children will get the CTC even if a parent has little or no income, and most families—including about 39 million children—will get the CTC automatically if a tax return was filed in 2019 or 2020.
Importantly, receiving the expanded CTC will not change eligibility for means-issued programs such as food stamps or SSI.
The EITC and the CTC are two of the tax code’s most effective income boosters for working and middle-class families. Given the positive track record of the EITC and CTC, there are countless reasons to make the CTC expansion permanent. These improvements yield benefits for our national economic prosperity and will serve as a game-changer for millions of children.
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