Democrats Stimulus Plan is a Big Win for Taxpayers with Kids

LeoFinance
14 days ago
8 Min Read
1577 Words

The Democrats have released their bill for the $1.9 trillion stimulus plan. This isn't a law yet, but since the Dems have the Congress and the Presidency, it's likely that this will be very close to the final bill.

In this video I go over the stimulus payments ($1400 - where's my $2k Joe?), changes to the Child Tax Credit, changes to the Dependent Care Credit, and some small tweaks to the Earned Income Credit.

See the full text here: https://budget.house.gov/sites/democrats.budget.house.gov/files/documents/S%20Con%20Res%205%20Bill%20Final.pdf

Transcript

[00:00:00] Hey, everybody, Neal, with Tax Sherpa here, the Democrats have released their text for the $1.9 trillion stimulus bill that Joe Biden has talked about already. And it is February 19th, 2021. As we have seen many times the. The specifics of this can change a lot, but this is actually fairly in line with what has already been talked about not withstanding the the minimum wage increase, but for the purposes that we're gonna talk about here, the tech stuff at least for individuals w that is all pretty much as expected.
So if we go down towards the end here at let's see. Recovery rebates to individuals section 96 Oh one. And this bill is only 500 something pages instead of 5,000. So the, this section, the recovery rebates to individuals, this is the stimulus payments that are going to people's, you know, by-in-large to their to their direct deposit accounts.
Or, you know, written [00:01:00] us checks or sometimes debit cards. So what they are saying here is $1,400, $2,800 with the case of a joint return. So if you have filed a single week, you're getting 1400. If you file as a married couple, then 2,800 plus 1400 multiply by the number of dependents of the taxpayer for such taxable year.
So it's basically $1,400. Per for everybody in the tax family. And of course there are the same phase outs. If you're filing single above 75,000, if you find a married filing joint up above 150,000, I believe it was. And yeah, 75,000 for for single and. Let's see head of households, 112,500 joint is 150,000.
Okay. So yeah, so $1,400 a week. So I've got, you know, it's me and my wife, two children. So that's a $5,600, which as of, as of this recording right now is about one 10th of one Bitcoin. So that's, that's a fun little [00:02:00] statistic. On top of that, there are other changes that are being proposed here quite a bit.
So let's go back to the table of contents and the relevant portions are. Let's see if I can actually find them. So unemployment is being extended through August. According to this proposal. Now keep in mind, none of this has been passed yet. This is just a proposal, but you know, chances are since the Democrats have control of the house, the Senate and the presidency that this is pretty close to, what's going to, I actually ended up passing the elder justice health care for workers, child tax credit.
So this was. Very interesting to me. So the child tax credit. Under the very old rules, you know, prior to 2017, the child tax credit was a, you know, a thousand dollars per kid, five kids. And it was, it was fully refundable, meaning that even if you didn't have any federal tax liability, that you would still get a refund based on that credit for the for that tax year.
So what there's, [00:03:00] so tax cut and jobs act, which was the Trump. Tax reform raised that from 1000 per child, up to 2000 per child. And up to 1400 of that was refundable. So you could have 600 non-refundable 1400 refundable. So what they're proposing here. Is that it goes from 2000 to 3000 per child.
They're extending the age from 16 to 17. So, you know, under the, under the old rules, you know, the child, the child credit expired when the child turns 17. So, you know, there was kind of this, this low period, if if you had a 17 year old, still in the house and most 17 year olds are, and you know, you might get some credits for, for college.
If they, if they end up going to college, that you have to. That you had to pay for, but yeah, so they're extending that to 17 and now when they're turning 18, the, the child's credit expires. So I think that's gonna actually make a lot more sense to people. Most people don't think of seventeen-year-old as independent adults cause you know, all the other laws say 18, basically.
So so that's, that's, you know, raising the [00:04:00] amount either child is under six, they're actually gonna raise that to 3,600 and You know, the other change they're looking at making is instead of that, all being at once on your tax return, they're looking at it, give you giving you payments every month.
And inside of this, this text here, they are talking about setting up a whole online system where you could log in and you could set whether you want Whether you want you know, payments every month or you want it annually and how much and in which way and all that kind of stuff. So it's, it's pretty interesting.
And that's this advanced payment of child tax credit you know, issue. So on another change, they're looking at making his changes to the earned income credits. So it's earned income tax credit. So currently, if you are a if you are a single. Person and you make less than about $13,000, then you have to be at least 25 in order to claim the.
The earning [00:05:00] credit for yourself. W what this bill is proposing is to lower that down to 19, actually. So people who are on their own, you know, after after leaving the home and you know, are making, you know, relatively low wages, you know, basically federal poverty line kind of wages, then they will be eligible for that earned income credit, which can be worth, you know, several hundred dollars depending on, on exactly how much you make during that year.
And then a couple of little, little changes, but that is, that is sort of the the big one there. Now the other thing is the dependent care assistance. So this is your basically your child, your child care credit. So. For the, for the majority of filers childcare credit applies to children, birth through 12, who are paying for daycare and aftercare and those sorts of things you know, caring for independence and then expires when they turn 13, unless they have special needs or something like that.
So that is a non-refundable [00:06:00] credit under the current rules, meaning that it can reduce how much taxes you owe or are. Even if you get a refund, it can reduce the total tax liability, but you're not going to get cash back out of it. You know, from, from the government. So right here, they're saying, you know, they want to make the credit refundable, which is, which is a nice change for taxpayers.
And also they're going to increase the dollar amount, dollar limit amount creditable. So the way it works under the current rules is that. Up to the first $3,000 you spend on that dependent care is, goes towards this credit. And then you can have up to up to $6,000 total of you know, of that. So that would be, that would be for two children, basically.
So, what they're saying here is that they're going to increase that from 3000 per kid up to 8,000 per kid. And that actually makes a lot of sense simply because childcare is incredibly expensive. So so you know, the, you know, when I talk to. You know, when I talked to clients [00:07:00] about, you know, their, their trying, Kara's like, Oh, do you spend, you know, how much are you spending on childcare?
And, you know, average number is basically a thousand a month for pretty much anywhere in the country for for, you know substantial daycare kind of stuff. And, you know, it reduces a little bit depending on what they do as child gets older. But so it's a, it's a dramatic expense. I've seen plenty of people spending, you know, 10, 15, 20% of their take-home income on childcare, you know, no problem.
So so they're increasing the dollar. Amount that goes towards that credit. And they're also tweaking the percentages and how much credit you'll get, and then they're in there making that refundable. So that'll be a nice big boost for for taxpayer. So between those two things, you know, the The child or the child tax credit and the additional child tax credit, which is the fundable portion and the changes here to the dependent care credit.
Then, you know, this is, this is a big actual win for individual taxpayers, especially those who have, you know, dependent children. [00:08:00] So obviously. No, this is still in the works. That's still in flux and this was just released about an hour or two ago. So more things will be found as we go through this 500 page document.
But for now that's the interesting stuff that I saw so far.

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