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Will Congress approve a plan to get extra money into the arms of lower-income households with kids this yr? The invoice — The Tax Relief for American Families and Workers Act of 2024 — would enhance the child tax credit by growing the utmost refundable quantity per youngster over the following three years if authorised by the Senate after which signed into regulation.
As a part of an enormous COVID help bundle in 2021, Congress temporarily expanded the child tax credit, which helped drive child poverty to a record low. Congress did not prolong the bigger credit score quantity past 2022, and the credit returned to its pre-pandemic level.
The proposed enhance to the kid tax credit score would work in a different way than the 2021 change, and the Center on Budget and Policy Priorities estimates that 16 million kids in low-income households would profit from the brand new boosted credit score within the first yr. The credit score enhance is a component of a bigger tax invoice that might prolong some enterprise credit. We’ll make it easier to discover out should you’d be eligible for the kid tax credit score, and the way a lot cash you and your dependent kids might get. For extra, this is when you could expect to receive your child tax credit refund and which states are sending child tax credits in 2024.
What is the proposed 2024 enhanced youngster tax credit score?
The proposed modifications to the $2,000 youngster tax credit score would cowl three tax years: 2023, 2024 and 2025. Which means you possibly can declare the expanded credit score this tax season whenever you file your 2023 tax returns.
The kid tax credit score would proceed to be partially refundable, which means that for part of the credit score, you possibly can get a refund even should you did not owe any tax. The brand new guidelines would improve the utmost refundable quantity from $1,600 per youngster. For the tax yr 2023, it will improve to $1,800; for the tax yr 2024, to $1,900; and for the tax yr 2025, to $2,000. The 2024 and 2025 quantities could be adjusted for inflation.
The rest of the $2,000 after the refundable quantity ($200 for tax yr 2023) could be nonrefundable, which means you possibly can solely use the tax credit score in opposition to taxes you owe — after your tax invoice hit zero, you would not get further cash.
The 2021 pandemic youngster tax credit score, compared, elevated the credit score quantity as much as $3,600 per youngster below age 6 and $3,000 per youngster ages 6 to 17. The credit score was absolutely refundable, and as a substitute of eligible households receiving the credit score in 2022 after submitting their taxes, they may obtain half of the credit score by month-to-month advance funds in 2021 after which the opposite half in 2022.
How a lot might I obtain with the proposed enlargement of the kid tax credit score?
The brand new youngster tax credit score plan seeks to get extra money into the arms of lower-income households. “Fifteen million children from low-income households will probably be higher off because of this plan,” said Sen. Ron Wyden, a Democrat from Oregon, who helped form the tax deal. “It is a huge deal to have this chance to cross pro-family coverage that helps so many children get forward.”
Critics of the previous youngster tax credit score mentioned it stored cash from these kids who wanted it most. As much as 19 million kids within the lowest-income households acquired lower than the complete credit score as a result of their mother and father earned too little, the City Institute discovered (PDF).
With the brand new boosted credit score, the utmost refundable quantity per youngster could be $1,800 within the tax yr 2023, $1,900 within the tax yr 2024, and $2,000 within the tax yr 2025, letting lower-income households declare extra of the refundable portion of the credit score. Underneath the previous tax break, the utmost refundable tax credit score accessible per youngster was $1,600.
Guidelines across the new credit score would additionally present extra money to households with a number of kids, by bearing in mind the variety of qualifying kids when calculating the quantity of the credit score, said Rep. Jason Smith, a Republican from Missouri, who additionally helped craft the invoice.
For instance, the Center on Budget and Policy Priorities estimates {that a} single guardian with two kids who earns $13,000 would see their credit score double within the first yr, for a $1,575 acquire.
Would I qualify for the brand new youngster tax credit score?
The eligibility guidelines across the new credit score could be much like the prevailing, non-pandemic youngster tax credit score. To be eligible for the tax break this yr, you and your loved ones would need to meet these requirements:
- You’ve got a modified adjusted gross income, or MAGI, of $200,000 or much less, or $400,000 or much less should you’re submitting collectively.
- The kid you are claiming the credit score for was below the age of 17 on Dec. 31, 2023.
- The kid has a sound Social Safety quantity.
- They’re your legally acknowledged youngster, stepchild, foster youngster, sibling, half-brother or half-sister, or a descendant of one in all these classes (like a grandchild or niece or nephew).
- They’ve contributed not more than half their very own monetary assist within the related tax yr.
- They’ve lived with you for greater than half the yr.
- You are claiming them as a dependent in your tax return.
- You are a US citizen or resident alien.
When would I obtain the brand new youngster tax credit score?
In contrast to the 2021 credit score, the place you possibly can obtain half in month-to-month advance funds, below the brand new proposed guidelines, you’d declare the credit score whenever you file your tax return. You’d then obtain any youngster tax credit score cash you had been owed through your tax refund, or use that credit score to offset your tax legal responsibility should you owed cash. Though tax season is already underway, taxpayers would not be required to file amended tax returns to say the bigger credit score, The Washington Publish reported.
Will the expanded youngster tax credit score turn out to be regulation?
The Home handed the kid tax credit score invoice on Jan. 29, however Senate approval is unsure. Senate Majority Chief Chuck Schumer, a Democrat from New York, has said he supports the bill. The White Home this week mentioned Biden “stays dedicated to preventing for the complete expanded Little one Tax Credit score.”
For extra, this is what to do if you haven’t received your W-2 form yet and what the COLA increase could mean for your taxes.
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