Child's hand loading a piggy bank. Credit - Getty Images
On Tuesday, a bipartisan group of lawmakers announced a $78 billion deal that would expand corporate tax breaks and the child tax credit, which could put extra money in families' pockets as soon as this year if passed.
The plan, known as the Tax Relief for American Families and Workers Act of 2024, is part of a months-long negotiating process between Republicans and Democrats. If passed, the deal would revive the child tax credit from the 2021 American Rescue Plan Act. After that child tax credit, which was distributed in monthly payments, ended at the end of 2021 the number of children in poverty increased by 5 million in the following year, according to left-leaning organization The Center on Budget and Policy Priorities.
“Fifteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” said Senate Finance Committee Chairman Ron Wyden, a Democrat from Oregon.
The new proposed child tax credit would be more modest than the pandemic-era one passed in the American Rescue Plan, though The Center on Budget and Policy Priorities says that the expansion would particularly help black, Latino, and American Indian children.
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Here’s what to know about the deal.
How much would the child tax credit increase?
Under the deal, Americans would see expanded access to the child tax credit through 2025.
Larger families would especially benefit. Under current regulations, families with multiple children earn the same child tax credit as others with the same salary but only one child. The new deal would change the way child tax credit is calculated by allowing families to multiply the benefits per child. For instance, a family that makes $13,000 a year with two children would receive $1,575 per child, instead of $1,575 overall.
Lawmakers would also increase the refundability cap, or the maximum child tax credit families can earn per child, to adjust for inflation. The cap was previously $1,600 and would increase to $1,800 in 2023, $1,900 in 2024, and so forth.
Families who are eligible for this credit would also have the ability to choose whether they want to use their earned income from the current year or the year prior to calculate how much they would receive in child tax credit. The proposed child tax credit would not be distributed through monthly checks. Taxpayers would instead claim the child tax credit after filing their federal taxes.
Who is eligible?
Families with children who are dependents, under the age of 17, and have a Social Security Number that is valid for employment in the U.S. are eligible for the child tax credit. An extensive list of requirements is available on the IRS website.
Will the deal pass?
The proposal's future in Congress is unclear. Lawmakers are still working on cutting other deals to avoid a government shutdown in January, tying up their calendar, and the deal ultimately would need to pass both the Republican-led House and Democratic-led Senate.
In Tuesday’s press release, Wyden says he would like the deal to pass in time for tax filing season, indicating that he would “pull out all the stops to get that done.”
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