How Congress’ Latest Child Tax Credit Deal Could Impact Your Finances

Lawmakers Announce $78 Billion Deal to Expand Corporate Tax Breaks and Child Tax Credit

A bipartisan group of lawmakers revealed a $78 billion agreement on Tuesday that would enhance corporate tax breaks and the child tax credit. If the deal is approved, families could see extra money in their pockets as early as this year.

The plan, known as the Tax Relief for American Families and Workers Act of 2024, is the result of months-long negotiations between Republicans and Democrats. It aims to revive the child tax credit from the 2021 American Rescue Plan Act, which ended at the close of 2021. According to The Center on Budget and Policy Priorities, the discontinuation of the child tax credit led to a 5 million increase in the number of children living in poverty the following year.

Senate Finance Committee Chairman Ron Wyden, a Democrat from Oregon, expressed enthusiasm for the plan, stating, “Fifteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead.”

Although the proposed child tax credit would be less extensive than the pandemic-era one enacted in the American Rescue Plan, The Center on Budget and Policy Priorities believes that the expansion would particularly benefit black, Latino, and American Indian children.

Here are the key details of the deal:

1. Child Tax Credit Increase: The deal would provide expanded access to the child tax credit until 2025. Larger families would benefit the most as the new regulations would allow families to multiply the benefits per child. For example, a family earning $13,000 per year with two children would receive $1,575 per child instead of $1,575 overall.

2. Refundability Cap: Lawmakers would increase the refundability cap, which is the maximum child tax credit families can earn per child, to adjust for inflation. The cap would rise from $1,600 to $1,800 in 2023, $1,900 in 2024, and so on.

3. Calculation Options: Eligible families would have the choice to use their earned income from the current year or the previous year to calculate their child tax credit. Unlike the previous monthly distribution, taxpayers would claim the credit after filing their federal taxes.

To be eligible for the child tax credit, families must have children who are dependents, under the age of 17, and possess a valid Social Security Number for employment in the U.S. Detailed requirements can be found on the IRS website.

The fate of the deal in Congress remains uncertain. Lawmakers are currently focused on negotiating other agreements to avoid a government shutdown in January, which could potentially delay the progress of this deal. Ultimately, it would need to pass both the Republican-led House and Democratic-led Senate.

Senate Finance Committee Chairman Ron Wyden has expressed his desire for the deal to be passed in time for tax filing season and has vowed to do whatever it takes to make it happen.