How The American Rescue Plan Is Helping 39 Million Families
Here are the top 3 ways the American Rescue Plan is helping 39 million families.
The Expanded Child Tax Credit (CTC)
The expansion of the CTC is expected to benefit 39 million households with children.
For now, the expanded credit applies only to tax year 2021, but many in Congress have expressed a desire to extend the expanded benefits through 2025 when the provisions of the Tax Cuts and Jobs Act (TCJA) expire or to make the expanded credit and the advance payments permanent.
The expanded credit increases the amount of the CTC from $2,000 per qualifying child to $3,000 per qualifying child for children ages 6 to 17 and to $3,600 per qualifying child for children under age 6.
CTC Fully Refundable
In addition to the monetary expansion, the credit has been made fully refundable (you can get the full amount even if you don’t have a federal income tax obligation) and an additional year of eligibility has been added. Before the expansion children “aged out” of the credit after age 16, under the new rules children as old as 17 are eligible.
The Expanded Child and Dependent Care Credit
While the expansion of the Child Tax Credit is getting most of the attention right now, the expansion of the Child and Dependent Care Credit also provides working families with additional tax benefits for 2021.
The credit is claimed by attaching Form 2441, Child and Dependent Care Expenses, to your annual income tax return (Form 1040).
To qualify for the credit the care expenses must be used to allow the parent or parents to work. Both parents in a two-parent household must have earned income to qualify. However, a parent is considered to have earned income for any month or part of a month if they were a full-time student at a qualifying institution or if they were unable to care for themselves.
Care expenses for children under age 13 qualify as do care expenses for a disabled spouse and older qualifying dependents who require care. Daycare for working parents obviously qualifies for the credit.
The #1 Way Families Are Being Helped - Increased Health Insurance Subsidies
The American Rescue Plan has dramatically boosted health insurance subsidies!
"We find that the number of people eligible for a subsidy to purchase Marketplace coverage has increased 20% from 18.1 million to 21.8 million with passage of the ARPA. We estimate that the average savings under the ARPA subsidies will be $70 per month for current individual market purchasers, ranging from an average savings of $213 (39% of current premiums after subsidies) per month for people with incomes between 400% and 600% of poverty to an average savings of $33 per month (100% of current post-subsidy premiums) for people with incomes under 150% of poverty (who will now have zero-dollar premiums for silver plans with significantly reduced out-of-pocket costs). We also find that the majority of uninsured people (63%) are now eligible for financial assistance through the Marketplaces, Medicaid, or Basic Health Plans. In fact, more than 4 out of 10 uninsured people are eligible for a free or nearly free health plan through one of these programs."
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