More money could be on the way to those who need it in 2021.

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President-elect Joe Biden officially unveiled his $ 1.9 trillion stimulus plan Thursday. Together with one third stimulus test, more weeks of unemployment benefits, and Funding to expand the COVID-19 vaccine rolloutIt also included an extension of the child tax credit, which would allow families to get more money out of their taxes. Biden’s proposal is not law – at least not yet. On January 20th he officially takes over the office of President.

Basically, the Child Tax Credit (CTC) is exactly what it sounds like: a tax credit that parents can claim to help lower their tax burden. For many, this may be a much-needed source of relief as part of a 2020 tax refund.

Here is everything you need to know about the CTC, including how to get there, how much it is worth, and what Congress’s anticipated plans are to improve it.

What is the Child Tax Credit?

The CTC is a $ 2,000 loan that parents can claim against their taxes for any child under the age of 17 (the same age range for Child addicts when it comes to Stimulus checks.) And if that credit exceeds the amount of taxes a family actually owes, parents can still get up to $ 1,400 of the balance as a refund; This is technically known as “Child Additional Tax Credit” or a refundable CTC. For example, a couple with children ages 5, 10, and 12 would receive a total of $ 6,000 in child tax credit – unless a refund is due. In that case, they would get $ 4,200.

Families with older children are also eligible: they can claim $ 500 for each child aged 17-18 or for full-time students aged 19-24.

Note that higher income families may receive reduced credit, although the admission requirements are fairly broad. Married couples who jointly file with an Adjusted Gross Income less than $ 400,000 are eligible for the full amount, as are people with one AGI under $ 200,000.

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What does the CTC have to do with a business cycle calculation?

In Biden’s American Rescue Plan (PDF), families with children aged 17 and under would receive $ 3,000 in credit, while families with children under 6 would receive $ 3,600 in credit. His plan also has the full amount available for a refund in lieu of the current $ 1,400.

The plan also provides for families to receive credit for childcare. A family with one child could receive up to $ 4,000 in total, and a family with two additional children could receive $ 8,000. This tax credit is refundable and available to families earning less than $ 125,000 per year. A family with an income of $ 125,000 to $ 400,000 will receive a partial credit, although details have not yet been released.

“The Biden Plan is the most impressive and ambitious child poverty plan the US has ever seen,” tweeted economist Jason Furman, a former advisor to President Barack Obama’s administration. “This would not only help in the short term, it would also have long-term mobility advantages.”

Increasing the refund amount to just $ 2,000 would lift more than 3 million people out of poverty, according to the Center for Budgetary and Political Priorities.

Who is eligible for the Child Extended Tax Credit?

Politicians from both parties have expressed their support for the expansion of the CTC.

“The child tax credit has overwhelming bilateral support for a reason,” Senator Mike Lee, a Republican from Utah, told the Wall Street Journal on November 19 White House, House and Senate – Anyone who wants to raise the CTC will have my support. “

Why is this tax credit so heavily supported? In general, because taxes are refunded to families, they tend to spend them. This economic spending should strengthen economic activity.

“Getting money into the hands of lower-income people is a long-standing and proven approach to stimulating the economy,” said Mark Mazur, director of the Urban-Brookings Tax Policy Center.

The Republicans proposed the CTC back in 1997 under the Taxpayer Relief Act. And it was Senator Marco Rubio, a Republican from Florida who led the Tax Cuts and Jobs Act of 2017, which doubled the loan from $ 1,000 to its current amount. With Democrats pushing for a tax credit that Republicans create, both parties are more likely to support improving the credit for families.