Bipartisan Tax Bill Child Tax Credit: The house has passed a bill, that families could save up to 700$ from tax.
On Wednesday, the House of Representatives gave the green light to a bipartisan tax bill that aims to extend the child tax credit until 2025, potentially affecting taxpayers as early as this year.
This $78 billion package doesn’t completely revive the expanded child tax credit that families could claim during the COVID-19 pandemic. However, it does propose an increase in the maximum refundable tax break to $1,800 per child for the 2023 tax year, up from the previous $1,600.
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The proposed limit is set to climb further to $1,900 for the 2024 tax year and then to $2,000 in the subsequent year, with adjustments made for inflation.
Should the Senate give its approval soon, families filing their 2023 taxes in the upcoming weeks could take advantage of the expanded credit. This could translate to an average tax break of around $680 for eligible families during this tax season, as projected by the Urban-Brookings Tax Policy Center. Despite bipartisan support, it remains uncertain whether the bill will garner enough votes to pass in the Senate.
Benefits Of Low-Income Families
Parents with an annual income below $200,000, or $400,000 for couples filing jointly, and who have children aged 17 and under, are eligible for the full child tax credit.
Currently, families must earn a minimum of $2,500 or have three eligible dependents to qualify for any amount. The existing formula calculates the maximum credit amount as 15% of income over $2,500.
Under the new proposal, the credit would receive a boost. Taxpayers could take 15% of their income over $2,500 and multiply it by the number of eligible children they have to determine their maximum credit amount.
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While the income thresholds would remain the same, the new proposal aims to benefit lower-income families by increasing the refundable portion of the credit. Additionally, families can now use the previous year’s income if it enhances their credit eligibility.
The Center on Budget and Policy Priorities predicts that more than 1 in 5 children would benefit from the proposal in the first year, potentially lifting 400,000 children out of poverty.
According to CBPP estimates, families of half of the 16 million children set to benefit from the proposal could receive $630 or more. Among these families, 40% might gain $1,000 or more. In the initial year, 25% of families with benefiting children could see an increase of at least $1,400.
