House passes child tax credit expansion: How much money will it raise if passed by the Senate?

In an effort to send more money to low-income families with children, the U.S. House of Representatives passed the American Families and Workers Tax Cuts Act of 2024 on Wednesday night. This bill, if signed, would result in a significant increase in taxes. child tax credit We will increase the maximum amount that can be refunded per child over the next three years.

This story is part of 2024 taxesCNET covers the best tax software, tax tips, and everything else you need to file your return and track your refund.

The bill now heads to the Senate, where it faces an uncertain future before President Joe Biden signs it into law.

As part of the massive 2021 coronavirus relief package, Congress temporarily expanded the child tax credit, helping to push child poverty to record lows. But Congress did not extend the larger loan amount beyond 2022, and the loan amount returned to pre-pandemic levels.

The House-approved child tax credit expansion will work differently than the 2021 changes, with the Center on Budget and Policy Priorities predicting that 16 million children from low-income households will receive the new expanded tax credit in the first year. It is estimated that there will be benefits. This credit expansion is part of a larger tax bill that expands some business credits. We can help you find out if you qualify for the Child Tax Credit and how much you and your dependent children could receive. Learn more about when you'll see Child Tax Credit refunds in 2024 and which states will implement the Child Tax Credit.

What are the proposed child tax credit enhancements in 2024?

The proposed changes to the $2,000 child tax credit would cover three tax years: 2023, 2024, and 2025. That means you can claim the expanded tax credit this tax season when you file your 2023 tax return.

The child tax credit remains partially refundable. This means that even if you don't pay taxes, you can still get a refund on some of your deductions. And the new rules increase the maximum refundable amount from $1,600 per child. For tax year 2023, it increases to $1,800. For tax year 2024, he will make $1,900. For tax year 2025, he will have $2,000. Amounts in 2024 and 2025 are adjusted for inflation.

After excluding the refundable amount ($200 for tax year 2023), the remaining $2,000 will be non-refundable. In other words, tax credits can only be used against taxes owed. You cannot receive any additional money after your tax liability reaches zero.

In contrast, the 2021 Pandemic Child Tax Credit increases the credit amount to up to $3,600 per child under 6 and $3,000 per child between 6 and 17 years old. This credit is fully refundable, and instead of taking the credit after filing a 2022 return, eligible households will receive half of the credit through a monthly advance payment in 2021 and half of the credit in 2022 if they withhold their taxes. You can receive the other half.

How much could I receive from the proposed child tax credit expansion?

A new child tax credit plan aims to put more money into the hands of low-income families. “15 million children in low-income families will be better off as a result of this plan,” said Democratic Sen. Ron Wyden of Oregon, who helped shape the tax deal. “It's amazing that we have the opportunity to pass pro-family policies that will help so many kids get ahead.”

Critics of the previous child tax credit said it would keep funding from the kids who need it most. Up to 19 million children in the lowest income households receive less than the full credit because their parents earn too little, a study by the Urban Institute found (PDF).

New increased credit increases the maximum refund amount per child to $1,800 for the 2023 tax year, $1,900 for the 2024 tax year, and $2,000 for the 2025 tax year, allowing low-income households to claim a larger refund of the credit. become able to. Under the previous tax cut, the maximum refundable tax credit per child was $1,600.

Rep. Jason Smith, a Missouri Republican who also helped author the bill, said the new credit rules would allow parents to take into account the number of eligible children when calculating the amount of the credit. He said it would also provide more funds to households with existing households. .

For example, the Center on Budget and Policy Priorities estimates that a single parent with two children with an income of $13,000 would double their credit in the first year, earning a benefit of $1,575.

Am I eligible for the new child tax credit?

Eligibility rules for the new credit will be similar to the existing non-pandemic child tax credit. To qualify for this year's tax relief, you and your family must meet the following requirements:

  • Your modified adjusted gross income (MAGI) is $200,000 or less, or $400,000 if you're filing jointly.
  • The child applying for the credit was under 17 years of age as of December 31, 2023.
  • The child has a valid Social Security number.
  • They are your legal children, stepchildren, foster children, siblings, half-brothers, half-sisters, or descendants of any of these categories (grandchildren, nieces, nephews, etc.).
  • They contribute only half of their own financial support in the relevant tax year.
  • They live with you for more than half the year.
  • You are claiming them as dependents on your tax return.
  • You are a U.S. citizen or resident alien.

When can I get the new child tax credit?

Under the new proposed rules, you would apply for the credit when you file your tax return, unlike the 2021 credit where you could receive half of it in monthly upfront payments. You will then receive any unpaid child tax credits through your tax refund or, if unpaid, use the credits to offset your tax liability. Although tax season has already begun, taxpayers do not need to file an amended tax return to claim the larger deduction, The Washington Post reported.

Will expanding the child tax credit become law?

The House passed the child tax credit bill on January 29, but Senate approval is uncertain. “This popular bipartisan tax bill will be embroiled in chaos in the Senate for weeks to come,” Senate Majority Leader Chuck Schumer, D-N.Y., said, according to Punchbowl News. He said he supports the bill. And the White House said this week that Biden “remains committed to fighting for the full expansion of the Child Tax Credit.”

Learn more about what to do if you haven't received your W-2 form yet and how the COLA increase will affect your taxes.

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