WASHINGTON (NEXSTAR) — The $1.9 trillion federal pandemic relief package could be approved in a matter of hours. And with it, comes a number of tax breaks that could benefit your bottom line.
One of the most notable is an increase in the tax credit that taxpayers can claim for dependent children.
Under current law, most taxpayers can reduce their federal income tax bill by up to $2,000 per child. The bill would increase the tax break to $3,000 for every child age 6 to 17 and $3,600 for every child under the age of 6.
Families would get the full credit regardless of how little they make in a year.
The aim is to deliver the money, which is an advance payment on the tax credit, in smaller monthly payments instead of one larger lump sum.
The exact timing of when this money would arrive is still unclear. If the Treasury determines that a monthly payment isn’t feasible, then the payments are to be made as frequently as possible.
Elaine Maag, principal research associate in the Urban-Brookings Tax Policy Center, said monthly payments could begin as soon as July but if the government opts for a quarterly payments it take until could fall.
Add in the $1,400 checks and other items in the proposal, and the legislation would reduce the number of children living in poverty by more than half, according to the Center on Poverty and Social Policy at Columbia University.
The bill also significantly expands the Earned Income Tax Credit for 2021 by making it available to people without children. The credit for low and moderate-income adults would be worth $543 to $1,502, depending on income and filing status.
The benefit of the EITC would not be felt until taxpayers file their returns for the 2021 tax year, which would typically be in the beginning of 2022.
The plan does not include student loan forgiveness, but it does allow for any income from the forgiveness of student loans be to be tax-free from 2021 through 2025.
The Associated Press contributed to this report.