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Here’s how the stimulus bill could affect you.

  • March 07, 2021

The bill would make the credit more generous for 2021, particularly for low- and middle-income people.

Currently, the credit is worth up to $2,000 per eligible child. The bill would increase it to as much as $3,000 per child ($3,600 for ages 5 and under). It would also raise the age limit for qualifying children to 17, from 16.

Here’s where it gets interesting: You could receive some of the credit as an advance on your 2021 taxes.

The bill would make the credit fully refundable, which means you can receive money from it as a tax refund even if your tax bill is reduced to zero. And half of that money could be advanced to households over the next six months (based on their 2020 tax information, or 2019 if that was unavailable). It’s not clear how frequently payments would be made — perhaps monthly — but under the bill they would begin in July.

The changes are effective for 2021 only, though at least some Democrats would like to make it permanent.

Married couples who have modified adjusted gross income up to $150,000 (or heads of household up to $112,500 and single filers up to $75,000) would receive the full value of the new benefit.

But after that, the extra amount above the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every $1,000 in modified adjusted gross income that exceeds those levels. (For joint filers with one child age 6 to 17, the extra amount would be phased out at about $170,000.)

At that point, the tax credit levels out at $2,000, and is then subject to the current income limits. The $2,000 benefit begins to phase out when married filers have adjusted gross income of $400,000 ($200,000 for singles).

Should the bill become law, the advance payments would total up to half the value of the credit the household is eligible to receive. (The other half would be claimed on the 2021 return.) But exactly how often the payments would be sent out depends on what the Treasury Department decides is feasible.

Here’s how it might work for a couple earning $150,000 or less. With two children, ages 7 and 9, they would be eligible for a $6,000 credit ($3,000 times two). If the payments were made monthly, the family would receive $500 per month starting in July and lasting through the end of the year. The remaining $3,000 would be claimed in 2021 on their tax return.

Article source: https://www.nytimes.com/live/2021/03/06/business/stimulus-check-plan-details/

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