Tax Relief
The American Rescue Plan’s expanded Earned Income Tax Credit will impact nearly 420,000 Virginian adults, enabling them to work with less financial stress. Additionally, more than 1.5 million Virginian children will benefit from the Child Tax Credit expansion, including lifting 85,000 Virginian children out of poverty.
This plan will expand the EITC for 2021 for taxpayers with no qualifying children by:
- Almost tripling the maximum credit amount, from $543 to $1,502.
- Reducing the minimum age to claim the credit for these workers from 25 to 19, except for full-time students, and eliminating the upper age limit on the credit, allowing qualifying childless workers who are age 65 and above to benefit.
- Increasing the earned income amount to $9,820, and increasing the level of income where the credit begins to phase-out to $11,610.
- Providing a match of up to three times the current cost of Puerto Rico’s EITC, should Puerto Rico choose to expand its credit, and covering 100% of the cost of other U.S. territories’ EITCs.
- It also includes a provision to ensure that workers whose earnings decline this year due to the pandemic do not see a reduced EITC amount as a result.
The plan will expand the Child Tax Credit (CTC) for 2021 by:
- Increasing the CTC from the current $2,000 amount to $3,000 for children between the ages of 6 and 16. Children who are 17 years old, and are typically ineligible for the credit, will be able to benefit for 2021.
- Creating a $3,600 tax credit for eligible children below the age of 6.
- Making the CTC fully refundable. By eliminating both the $2,500 minimum earnings requirement and the cap on the refundable piece of the credit, this package will ensure that the lowest-income households can benefit from this relief.
- Ensuring individuals making up to $75,000 and couples making up to $150,000 will receive the full, increased CTC amount.
- Delivering the credit as a periodic payment, through the IRS, starting in July of this year. Under this proposed schedule, families would receive half their total CTC benefit through periodic payments for the rest of 2021 and claim the remaining half of their total benefit on their 2021 tax returns.
