A legislative advancement toward bolstering the child tax credit promises potential financial relief for families in the upcoming year. The Tax Relief for American Families and Workers Act, championed by Missouri Republican Rep. Jason Smith and Senate Finance Chairman Ron Wyden of Oregon, cleared a significant hurdle by garnering an overwhelming 357-70 vote in the U.S. House. This crucial step paves the way for the bill’s journey to the Senate.
Proposed Changes to Child Tax Credit
The bill seeks to enhance the child tax credit structure over the next three years. Presently, the credit provides a maximum of $2,000, with only $1,600 being refundable. However, the proposed legislation would increase the maximum refundable amount per child. For the tax year 2023, the refundable portion would rise to $1,800, climbing further to $1,900 in 2024 and reaching $2,000 in 2025, with adjustments made for inflation.
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Impact of the Bill on Taxpayers
If enacted, taxpayers could retroactively benefit from these adjustments, potentially seeing increased refunds in 2024 for taxes filed in 2023. Notably, a portion of the credit, $200 for the tax year 2023, would become nonrefundable, meaning it could only be applied against owed taxes.
Reception and Comparisons to Previous Programs
While proponents of the bill laud its potential to assist around 16 million low-income children, some critics highlight its divergence from pandemic-era relief measures. In 2021, the child tax credit was temporarily expanded to $3,600 per child under six years old and $3,000 per child aged 6-17, with the credit being fully refundable and disbursed partially through monthly installments.
Eligibility Criteria for the Revised Child Tax Credit
The eligibility criteria for the revised child tax credit remain consistent with the existing structure. To qualify for the credit, individuals and families must meet certain conditions:
- Have a modified adjusted gross income of $200,000 or less (or $400,000 or less for joint filers)
- Dependents must have been under 17 years old as of December 31, 2023
- Each child must possess a valid Social Security number
- Relationship requirements stipulate the dependent must be a qualifying relative
- Dependents cannot provide more than half of their financial support
- The dependent must have lived with the filer for more than half of the tax year
- The taxpayer must not file a joint return with their spouse except to claim a refund of withheld income tax or estimated tax paid.
With the bill advancing to the Senate, its potential to impact families nationwide remains a focal point of legislative discussion and public interest.
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