A new tax package could expand the Child Tax Credit to more low-income households which is an estimated $33 billion.
A new tax package is making its way through Congress, with some Democrats and Republicans reaching a surprise agreement at the start of the election year for a legislative body that’s had its issues. If this bill passes, the deal could help to fulfill one of President Joe Biden’s promises.
The Child Tax Credit would be expanded to more low-income families, and Republicans would get to revive three expired tax breaks for businesses. This bill carries a $78 billion total price tag, the package would expand the Child Tax Credit through tax year 2025 for an estimated $33 billion.
The Child Tax Credit was expanded significantly under Biden in the 2021 American Rescue Plan, which led to a “historic” reduction in child poverty in the U.S., but the popular measure expired at the end of that year. Then, those gains were reversed, and child poverty soared, more than doubling from 4 million in 2021 to 9 million in 2022, according to the United States Census Bureau, the poorest families, which qualified for $3,600 per child payments under the expanded credit, got $0 when it expired.
The new legislation isn’t as generous as 2021’s, but they are focusing on making more complex changes to the Child Tax Credit. This would increase the credit amount for about 16 million children, according to the Center on Budget and Policy Priorities. One of the biggest changes is increasing the maximum credit per child from $1,600 to $2,000 by 2025. This will also change the “phase-in” rate so less income is needed to receive the full benefit. This allows for what is called a “lookback” period. This is when someone could use income from a previous year to qualify for a higher credit.
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