Democrats push Biden to make expanded tax credits that help low-income Americans permanent

Over 40 Democratic senators urged President Joe Biden to make permanent two key tax credits that were expanded in the latest stimulus deal and support low-income families.

"We must not allow these critical expansions to expire after one year," the senators wrote in a letter on Friday. "Doing so would result in a significant spike in child poverty, after we have made historic strides to end it. It would mean that millions of struggling adult workers would once again be taxed into poverty."

The recently-implemented $1.9 trillion American Rescue plan includes a one-year expansion of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) that increases the credits, widens eligibility, and allows the CTC to be distributed in periodic payments. In addition to making the credit permanent, the lawmakers also pushed Biden to make the CTC payments monthly.

Under the new legislation, the CTC increased to $3,000 per child under 18 and $3,600 per child under 6 for the 2021 tax year. Previously, the tax credit was $2,000 per child under 17. Half of the credit may be advanced to families over the next six months beginning in July as periodic payments. Lawmakers are calling for the advanced periodic payments to become monthly.

The CTC was also made fully refundable — another provision lawmakers want to make permanent — which allows taxpayers to get a refund even if they owe more in taxes. The lawmakers say that previously 27 million children weren't eligible for the full amount of the CTC or received no credit at all when the credit was partially refundable.

Read more: Taxes: Here's how to know if you should itemize

Families with children in the bottom 20% of the income distribution would get an average benefit of $3,400, according to estimates previously provided to Yahoo Money by the Tax Policy Center, while overall families with children would get an average benefit of $2,300. About half of the benefit would go to families in the bottom two income quintiles, the Center found.

Under the latest stimulus deal, the EITC is expanded to childless workers from age 19 — previously 25 — except for some full-time students. The maximum age of 65 is also eliminated.

The legislation also gives workers the option to use the "look-back rule," allowing taxpayers to use 2019 income to determine eligibility for EITC in their 2021 taxes. The look-back rule is also in effect for this year's filing season. Lawmakers want to allow taxpayers to permanently have the option to use a previous year's income to determine eligibility.

"No recovery will be complete unless our tax code provides a sustained pathway to economic prosperity for working adults and families," the lawmakers wrote. "Your forthcoming Recovery Plan is the opportunity we have to make the expansions of these credits permanent."

The president has expressed interest in making the CTC permanent and soon will unveil a recovery package that will likely include numerous changes to the tax code.

"The president wants to make the Child Tax Credit permanent,” White House Press Secretary Jen Psaki said at a press conference in March.

Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova

Read more:

  • Stock market highs, booming housing, and millions unemployed: A tale of two Americas amid the coronavirus pandemic

  • Taxing rich Americans gains steam as Biden and states push plans

  • Jobs aren't bouncing back for Black Americans — and it could be worse than reported

  • Read more personal finance information, news, and tips on Cashay

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and Reddit.

Source: Read Full Article