The child tax credit is intended to reduce the tax burden on families by providing a deduction for each dependent child under the age of 17. Established in 1997, it now provides a $2,000 benefit per kid, with $1,600 of that amount refundable. This implies that even if you owe less in taxes, you can still receive a refund of up to $1,600. The remaining $400 is purely intended to lower your tax liability.
As part of the American Rescue Plan in 2021, President Joe Biden expanded the child tax credit significantly for a limited time. The credit has been extended to $3,600 per kid under the age of six, and $3,000 for children aged six to seventeen.
It was also made entirely refundable, allowing families to claim the entire amount, even if they owed little or no taxes. Additionally, the funds were distributed on a monthly basis, giving families with immediate financial help.
What happened to the child tax credit after 2021
Institutions such as Columbia University’s Center on Poverty and Social Policy did research that found the enlarged child tax credit had a significant impact. The interim changes lowered monthly child poverty by roughly 30%, helping an estimated 61 million children across the country. Despite its success in reducing poverty, this expansion was always supposed to be transitory and would expire at the end of 2021.
Since 2022, the credit has reverted to its pre-American Rescue Plan levels of $2,000 per kid, with a portion of the credit being non-refundable. Furthermore, unless Congress takes action, the child tax credit will be reduced further to $1,000 per kid beginning in 2025.
Efforts to prolong or expand the enhanced credit have encountered substantial obstacles. One prominent case happened on August 1, 2023, when the Senate approved a plan to enhance the credit. The measure did not receive enough votes, as the majority of Republican senators opposed it. This underlined the partisan rift over the future of the credit, as well as the larger debate over federal tax policy.
What Republicans propose for the child tax credit
While some Republican leaders have shown an interest in increasing the child tax credit, real suggestions have been scarce. During his presidency, Donald Trump expanded the credit from $1,000 to $2,000 with the Tax Cuts and Jobs Act of 2017. However, unless additional legislative action is done, this boost will expire in 2025.
In his 2024 campaign, Trump has not outlined specific plans regarding the child tax credit.
His campaign website emphasizes tax reduction, but does not go into detail about this topic. Nonetheless, members of his campaign staff have indicated that if re-elected, he would be willing to back a large increase of the credit.
J.D. Vance, Trump’s running mate, has taken a more public position on the subject. In interviews, Vance has supported for expanding the credit to $5,000 per child. However, he has admitted that any such move would require bipartisan backing in Congress, which has previously proven impossible to overcome.
Differences between proposals from Trump and the Democrats
While Republicans’ intentions for the child tax credit are hazy, Democrats have made it a key component of their economic strategy.
Kamala Harris, who is running for president in 2024, has underlined the significance of expanding the credit to help families with young children and increasing refundability for low-income households. Her strategy focuses on increasing credit availability to individuals who benefit the most from direct financial help.
Critics of Trump’s approach to the child tax credit allege that his policies primarily benefit middle- and upper-income families with enough taxable income to qualify for the credit.
In contrast, many of the country’s poorest households, who do not earn enough to file tax returns, are frequently denied full benefits. Democrats have cited this difference as proof of the need for a more inclusive policy that emphasizes poor families.
What families can expect in the coming years
The future of the child tax credit is heavily dependent on the results of the 2024 elections and the policy agendas of the next Congress and government. For the time being, the present $2,000 credit per kid will continue in effect. However, without legislative action, the credit will be reduced to $1,000 in 2025, which could have serious financial consequences for families, particularly those with lower incomes.
For families who benefited from the 2021 expansion, a reduction in the credit would be a significant financial blow. Increased credit not only alleviated financial stress, but it also had significant benefits in terms of poverty reduction and economic security. Policymakers will have to weigh these outcomes against fiscal restrictions and competing legislative goals as they debate the credit’s future.
Major changes to the child tax credit will need agreements between Congress and the administration, as the executive branch cannot make these changes on its own. As conversations progress, families will undoubtedly face continued uncertainty about how much financial support they may expect in the coming years.
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