Can Congress Approve More Money for Lower-Income Families?
As debates continue in Congress, the Tax Relief for American Families and Workers Act of 2024 seeks to expand the child tax credit in order to send more money to lower-income families with children. It is currently awaiting approval from the Senate and if successful will become law in the near future.
Boosting the Child Tax Credit
Last year, Congress temporarily increased the child tax credit as part of a massive COVID aid package, resulting in a record low child poverty rate. However, the increase was only in effect for 2021 and the credit has since returned to its pre-pandemic level.
The proposed bill for 2024 aims to implement a different approach. It has the potential to positively impact 16 million children from low-income families in its first year, according to estimates from the Center on Budget and Policy Priorities.
Revised Child Tax Credit Plan
The proposed changes to the child tax credit would cover the tax years 2023, 2024, and 2025. The new plan maintains the refundable nature of the credit, allowing eligible families to receive a refund even if they do not owe any tax. The maximum refundable amount per child is set to increase gradually over the three-year period, reaching $2,000 by 2025.
Comparatively, the 2021 pandemic child tax credit reached up to $3,600 per child, with the credit being fully refundable. Furthermore, under the new plan, the credit will be calculated based on the number of qualifying children in a household.
Eligibility and Claiming the Credit
Eligibility requirements for the new child tax credit mirror those for the existing non-pandemic child tax credit with a few key conditions:
- A modified adjusted gross income (MAGI) of $200,000 or less, or $400,000 or less for joint filers
- Children under the age of 17 on December 31, 2023
- Valid Social Security number for the child
- Legal relationship between the child and the taxpayer
- Dependent children have not provided more than half of their own financial support
- The child has lived with the taxpayer for more than half of the year
- The child is claimed as a dependent on the taxpayer’s return
- The taxpayer is a US citizen or resident alien
Potential Impact on Lower-Income Families
The proposed expansion of the child tax credit aims to prioritize lower-income families with the goal of benefiting an estimated 15 million children. Criticism of the previous child tax credit suggested that these families were not receiving the full benefits to which they were entitled.
The new boosted credit, coupled with adjustments for inflation, could provide lower-income families with a maximum refundable amount per child of $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025— an increase from the previous maximum of $1,600.
The Road Ahead
The bill has already passed the House of Representatives, but its fate in the Senate remains uncertain. Senate Majority Leader Chuck Schumer has voiced his support, and President Joe Biden is committed to fighting for the full expanded Child Tax Credit.
The potential impact of the bill on lower-income families is substantial, but its final approval and implementation rests on the Senate’s decision.
