New research from the Urban-Brookings Tax Policy Center has found that the House COVID-19 stimulus package, which still has to pass through the budget committee and then eventually the Senate through the budget reconciliation process, will likely save most households lots of money on their taxes for their 2021 federal taxes. Here’s what you need to know.
Here’s How Much The Average Family Will Save On Their 2021 Tax Year
According to the Tax Policy Center, while the majority of the benefits of the COVID-19 stimulus package will go to low and middle-income households, even higher-income households will benefit from the expansion of tax credits, direct COVID stimulus payments, and more that are in the bill. On average, an American household could expect to see their 2021 federal taxes reduce by around $3,100. According to their analysis, the majority — two-thirds — of the benefits would go to low and middle-income households making $91,000 or less, but that over 10 percent of those benefits would also go to the highest-income 20 percent of households, or those that make over $164,000 a year.
The TPC reports that the expansions of the aforementioned tax credits would reduce federal revenues by about $460 billion in the fiscal year of 2021, and around $600 billion over the next decade.
But why will taxes be lowered?
Namely, the introduction of another round of stimulus payments, the expansion of the Child Tax Credit to become a monthly, fully refundable payment for all American families, the expansion of the Earned Income Tax Credit to include all earners, not just people 25 and up, and the Child and dependent Care Tax Credit enhancements will all give families more money and fewer tax burdens. And, in fact, the bill could be even more generous because the TPC notes that the enhanced premium tax credit for the Affordable Care Act was not included in their analysis.
Across the board, low and middle-income families are the most likely to benefit from the package: they’d receive 80 percent of the expanded CTC benefits, 70 percent of the earned income tax credit benefits, low and middle-income households would get almost 70 percent of the child care tax credit.
But, of course, that’s not the whole picture. High-income families will still see benefits in their taxes across the board, though the benefits do begin to phase out for the very wealthy.