President Joe Biden signed the $1.9 trillion American Rescue Plan Act into law (opens in new tab) Thursday (March 11), preparing millions of Americans for the third stimulus check.
The bill is supported by an overwhelming majority of registered voters (77%, according to a Morning Consult/Politico poll (opens in new tab)). It cleared the House earlier this week, and the Senate over weekend.
- Third stimulus check update: Date, timeline and what you need to know
- Stimulus check: Here's when you can expect your $1,400 check
- Third stimulus check calculator: See how much money you'll get
The package includes significant benefits for dependent children, some of them not well known and far beyond what the previous two packages allocated. Here's how families with dependent kids are likely to be directly affected by the American Rescue Plan Act.
A higher stimulus payment per dependent child, with fewer exclusions
In last March's stimulus bill, families received $500 per dependent child. In December's bill, the amount was $600. In this third round, the proposed payment for families that meet the income requirements (see bullets below) is $1,400 per child.
In addition to receiving significantly higher payments, all dependents claimed on a tax return are now eligible for the direct payment, regardless of age.
The first two packages excluded dependent children ages 17 and older, as well as dependent adults. This meant that many parents covering costs for their high-school seniors (or actual senior citizens) got no extra help.
In this new stimulus plan, taxpayers who cover over half the costs for college students, adults with disabilities and elderly dependents will see a $1,400 payment for each dependent they support.
As the bill is written, dependents will qualify for the full $1,400 payments according to the same income requirements as the tax filers who support them, which are:
- Individuals with an Adjusted Gross Income (AGI) of $75,000 or less
- Heads of household with an AGI of $112,500 or less
- Married couples with an AGI of $150,000 or less
Taxpayers whose AGIs are above those limits but up to $80,000, $120,000 and $160,000, respectively, still qualify for a scaled-down payment. (The Adjusted Gross Income is the income stated on your most recent tax return.)
Dependent payments will be sent directly to the taxpayer, not the dependents themselves.
A theoretical family of two parents who jointly make $70,000 and have two children, ages 15 and 17, plus a resident senior citizen at home will get a stimulus check of $7,000. Under the December stimulus bill, they would have received just $1,800.
A child tax credit for 2021 that beats last year's by 50% or more
The American Rescue Plan Act also greatly increases the child tax credit (opens in new tab), at least for one year. Furthermore, many families will receive monthly checks of up to $300 for each qualifying child during the last six months of this year.
In 2020, dependent children had to be under age 17 for the taxpayer to qualify for the standard $2,000 child tax credit. A tax credit, unlike a payment, simply subtracts that amount from your tax bill.
The American Rescue Plan Act includes credits for 17-year-olds (arguably the most important age for anyone who’s ever tried to keep a teenage boy fed and clothed).
In addition to including millions more dependent children nationwide, the proposal expands the amount of the tax credit. For children ages 6-17, the credit will be $3,000, and $3,600 for each child under six.
To be eligible for the credit, the child needs to have a Social Security number and live with the filing parent or guardian for at least six months out of the year.
Higher-income parents will not qualify for the expanded credit. The eligibility follows the same formula for incomes as for the direct payment above, including the scaling. Families whose incomes are above the stimulus-bill caps will still receive the $2,000 tax credit they received in 2020.
Monthly checks of up to $300 per child
Under normal circumstances, families who pay less than $2,000 in federal income taxes — for example, a single parent of two children who makes $25,000 — do not receive the entire child tax credit.
But under the American Rescue Plan Act, those parents whose child tax credits exceed their taxes, even at the $3,000/$3,600-per-child level, will see the entire amount.
Even better for these families, the IRS will give families advance payments on their child tax credits for each month from July through December 2021. Those monthly payments will be $300 for each child age 5 and younger and $250 for children age 6 through 17.
Even middle-income families will qualify. Here's a calculator to figure out how much you might get in advance child-tax-credit payments (opens in new tab). That same theoretical family mentioned above, making $70,000 with two teenage kids at home, would get $500 each month starting in July.