The House approved the Tax Relief for American Families and Workers Act of 2024, which aims to extend specific business tax credits and enhance the Child Tax Credit, taking a step closer to a potential overhaul.
The bill, with bipartisan support, is now headed to the Senate, but no voting date has been set. The legislation addresses the lapse of the extended Child Tax Credit, which increased from $2,000 to $3,600 and expired more than two years ago.
The proposed changes include making the Child Tax Credit more accessible to families with little or no income, addressing eligibility criteria, and fixing current issues that hinder some low-income families from receiving full credit for their initial income, potentially benefiting millions of children.
The House approved a bill on Wednesday that would prolong certain business tax credits and enhance the important incentive for parents, bringing the Child Tax incentive one step closer to a makeover.
(Photo : by Tasos Katopodis/Getty Images for Economic Security Project)The House approved a bill on Wednesday that would prolong certain business tax credits and enhance the important incentive for parents, bringing the Child Tax incentive one step closer to a makeover.
More than two years have passed since the extended Child Tax Credit, which increased the tax credit from its current $2,000 per child to as much as $3,600, expired, prompting efforts to restructure the tax benefit. Due to evidence that the CTC's pandemic-era expansion helped millions of children escape poverty, lawmakers have been pressed to strengthen the program ever since that expansion was ended by policymakers and anti-poverty campaigners.
Following the approval of the Child Tax Credit proposal by the House, Sharon Parrott, president of the left-leaning Center on Budget and Policy Priorities, stated that the initiative's inaugural year is projected to elevate up to 400,000 children above the poverty line. Additionally, it is expected to provide increased financial support to an extra 3 million children within families whose incomes fall below the poverty line.
Some families drew attention to the fact that the plan does not fully extend the CTC as it did during the pandemic when six monthly checks covering half of the tax benefit were sent in the second half of 2021. For each child, that gave parents hundreds of dollars a month in extra cash, which was usually utilized for clothes, preschool, and other child-related expenses.
The Child Tax Credit would become more accessible to more families thanks to the House bill's CTC increase.
This is because the original CTC may not be available to families with little or no income as it required a parent to make at least $2,500 per year.
If a taxpayer's income falls and they are ineligible for the tax credit, the proposed adjustments would allow them to calculate the CTC using income from either the current or previous year. The 2024 tax year would be the start of this.
A problem with the present CTC that prevents some low-income families from receiving full credit for their first $2,500 of income would also be fixed under the new bill.
To calculate the CTC for wages above that threshold, parent's income is multiplied by 15%. The revised formula would double the number of children in the household by 15% and multiply the parent's income by that amount.
This is a significant development since it allows low-income families with two or more children to be eligible for a larger CTC. Consider the CBPP's example of a single parent making $13,000 a year and having two kids.
