The House of Representatives on Wednesday passed a bipartisan tax bill that would expand the child tax credit through 2025 and could have implications for taxpayers as early as this year.
The $78 billion package wouldn't go so far as reviving the expanded child tax credit families were able to claim as part of the Covid-19 pandemic response. But it would raise the maximum refundable tax break to $1,800 per child for tax year 2023, up from $1,600.
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The limit would rise again to $1,900 for tax year 2024 and to $2,000 the following year, along with adjustments for inflation.
If the bill passes the Senate soon, families filing their 2023 taxes in the coming weeks could claim the expanded credit. That means eligible families could see an average $680 break this tax season, according to an Urban-Brookings Tax Policy Center projection. Though there's support from both parties, it's unclear whether the bill has the votes to pass the Senate.
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Low-income families could see bigger tax breaks
Parents who earn less than $200,000 a year, or $400,000 for couples filing jointly, and have children age 17 and under qualify for the full child tax credit.
Currently, families must earn at least $2,500 or have three eligible dependents to qualify for any amount. The maximum credit amount is calculated as 15% of income over $2,500.
Money Report
The new proposal would boost the credit by allowing taxpayers to take 15% of their income over $2,500 and multiply it by the number of eligible children they have to calculate their maximum credit amount.
The same income thresholds would stay in place under the new proposal, but the lowest-income families could see larger checks since the refundable portion of the credit would be larger. Additionally, families will be able to use the previous year's income if it increases their credit eligibility.
More than 1 in 5 children would benefit from the proposal in the first year, with 400,000 poised to rise out of poverty, according to the Center on Budget and Policy Priorities.
CBPP estimates that families of half of the 16 million children standing to benefit from the proposal would gain $630 or more. Of those families, 40% would gain $1,000 or more. In the first year, 25% of benefiting children's families would gain at least $1,400.
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