- Full breakdowns of new proposed tax breaks for low-to-mid-income families
- Biden: “Where we choose to invest speaks to what we value as a Nation. This year’s Budget, the first of my Presidency, is a statement of values that define our Nation at its best.”
President Biden’s recent release of the proposed Federal Fiscal Year 2022 Budget includes expansive spending, coupled with targeted tax breaks. The nearly $6 trillion budget allots $2.6 trillion for the American Jobs Plan and $1.7 trillion for the American Families Plan.
Biden’s budget proposal includes major tax breaks for low-to-moderate-income families in the form of refundable tax credits, all extended from provisions that were originally enacted under the American Rescue Plan (ARP).
1. Premium Tax Credit
| What is it? | What’s in the Budget Proposal? | What’s the Bottom Line? |
|---|---|---|
| The Premium Tax Credit (PTC) is the main insurance subsidy from the Affordable Care Act. The refundable credit helps eligible taxpayers pay for part or all of their insurance premiums. | • Increased tax credit amount for eligible taxpayers • Increased range of eligibility to include household incomes up to 400% of the federal poverty level | More households would qualify for larger tax credits |
2. Earned Income Tax Credit
| What is it? | What’s in the Budget Proposal? | What’s the Bottom Line? |
|---|---|---|
| The Earned Income Tax Credit (EITC) is a tax break for low-to-moderate-income families. Prior to the passage of the ARP, the credit provided little support for workers without qualifying children. | • Increased phase-in and phase-out rates and income range for childless workers, raising the maximum credit from $542 to $1,502 | The EITC would expand aid to include low-income workers without children |
3. Child and Dependent Care Tax Credit
| What is it? | What’s in the Budget Proposal? | What’s the Bottom Line? |
|---|---|---|
| The Child and Dependent Care Tax Credit (CDCTC) would be a fully refundable credit to cover all work-related expenses paid to a care provider for a taxpayer’s child and/or dependent. Prior to the ARP, the credit was not refundable, allowing it to reduce taxes owed to $0, without being paid back on anything potentially owed. | • Refundable tax credit up to 50% of $8,000 (maximum) in expenses for a child or a disabled dependent, $16,000 (maximum) for more than one child or disabled dependent • Exclusion of up to $10,500 in employer assistance and contributions for dependent care | The percentage of allowable expenses would be reduced for higher-income earners, plus refundable benefits |
4. Child Tax Credit
| What is it? | What’s in the Budget Proposal? | What’s the Bottom Line? |
|---|---|---|
| The Child Tax Credit (CTC) is a tax benefit granted to taxpayers per qualifying dependent child, designed to help taxpayers decrease their tax liability on a dollar-for-dollar basis. | • Officially Extended through 2025: • Option to receive benefit in full: (Under Age 6) Max. credit of $3,600 (Ages 6 – 17) Max. credit of $3,000 • Option for half of taxpayer’s allowance to be paid out monthly, with other half paid upon filing return: (Under Age 6) Max. $150/mo. (Ages 6 – 17) Max. $125/mo. | Option to receive half of tax credit as monthly payments or to decline and receive the full payment next year |
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