Stimulus Checks and Extended Tax Credits: This is how much money you could end up with
Between stimulus checks and expanded tax credits in the latest Covid Relief package, most U.S. households are ready to get extra cash.
The sum? Research by the Institute of Taxes and Economic Policy found an average of $ 3,450 for the bottom 60% of the workforce ($ 65,000 or less). The number reflects direct stimulus payments and extensions to both the child tax credit and the earned income tax credit.
“The people who you think need help will get it,” said Steve Wamhoff, director of federal tax policy for the institute.
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On Wednesday, Congress finally approved the so-called American rescue plan. It will now go to President Joe Biden for his awaited signature.
In addition to direct payments of $ 1,400 to most adults (and their loved ones) and the expansion of certain tax credits, the $ 1.9 trillion package includes $ 300 per week for unemployment insurance, rental benefits, and major health insurance subsidies, among other things .
The graph below shows the average expected benefit of all direct groups from the direct payments and expanded tax credits for children and earned income. The biggest benefit as a percentage of income would go to the bottom 20% of taxpayers.
It’s worth noting that the income ranges shown in the graph reflect amounts before reductions are applied (i.e., certain tax deductions, investment losses, etc.), Wamhoff said. So, a higher-income household could have an adjusted gross income low enough to qualify for either a stimulus check or tax credits.
For stimulus payments, the $ 1,400 per person with incomes of $ 75,000 to $ 80,000 for individual taxpayers, $ 112,500 to $ 120,000 for heads of household, and $ 150,000 to $ 160,000 for married couples filing joint tax returns will expire.
The child tax credit will also be increased in a number of ways for 2021, including an increase in the per-child payment from $ 2,000 for families with incomes below certain thresholds to $ 3,000 (exit starting at $ 75,000 for singles, $ 112,500 for Heads of household and $ 150,000 for married couples), with an additional $ 600 for children under 6. Children aged 17 and over also qualify for the first time.
The idea is for some of these tax credits to be passed on to qualified households year-round – starting in July – rather than forcing them to wait until April 2022 to claim the amount on their tax returns.
In addition, if the amount to which they are entitled is more than an individual’s tax liability, the invoice will be fully refunded at the tax time. Typically, a maximum of $ 1,400 can be reimbursed.
Taxpayers whose income is too high to qualify for the upgrade will continue to be eligible for regular credit of $ 2,000 per child as long as their Adjusted Gross Income is less than $ 200,000 (single applicants) or $ 400,000 (joint applicants) .
The tax credit for childless workers will also be expanded by increasing the maximum tax credit for this cohort from $ 543 to $ 1,502 in 2021, research by the Tax Foundation shows. The benefit would arise if taxpayers submit their tax returns for 2021 in spring 2022.
The bill also increases the income level (from $ 4,220 to $ 9,820) at which the earned income tax credit reaches its maximum and changes the exit to $ 11,610 instead of $ 5,280 for individual taxpayers. The age for qualifying for the credit will also be changed for this year: the minimum age is 19 instead of 24 years and the maximum age of 65 years would be deleted.