Senator Mitt Romney has joined President Biden in calling for a higher child tax credit. Presently, the child tax credit is worth $2,000 per kid under the age of 17 whom you claim as a dependent and who has a Social Security number. To qualify, the child must be related to you and generally live with you for at least six months during the year. The credit begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return and over $200,000 on a single or head-of-household return.
Romney's plan would permanently increase the child tax credit to $3,000 per child ($4,200 for a child under age 6) and would allow 17-year-olds to qualify. And he wants the credit to be paid in advance by having the Social Security Administration send monthly payments of $250 per child ($350 per child under age 6) to qualifying families. That would be a nice windfall for many families. Take a family of four with children ages 9 and 3. Assuming the family qualifies for both the child credit and for the advance payments, they would get $600 per month under Romney's proposal. The benefit would start to phase out for parents with an AGI above $400,000 on a joint return or $200,000 on a single return.
Romney's idea may sound like a blessing to parents of children age 17 and younger. Now, here's the rub. He wants to pay for his proposal by eliminating three popular tax breaks. First, he would get rid of the head-of-household filing status so that a single parent with children would have to file a single return with less favorable tax brackets.
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Second, parents of children under age 13 would no longer get a tax credit for a portion of the childcare costs that they pay. Presently, the child and dependent care credit is worth 20% to 35% of up to $3,000 in eligible childcare expenses, depending on your income…$6,000 if you have two or more children needing care.
Romney is also calling for an end to the state and local tax (SALT) deduction, which he calls an inefficient tax break for upper-income taxpayers. Currently, individuals who itemize on Schedule A of their Form 1040 can deduct up to $10,000 of the state and local income tax (or sales tax) and residential property taxes that they pay.
The Senator from Utah would also eliminate two anti-poverty programs for low-income families and reform the earned income tax credit available to low-income taxpayers.
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