What Congress’ New Child Tax Credit Deal Could Mean for You

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The House overwhelmingly passed a bipartisan tax package on Jan. 31 that would expand corporate tax breaks and the child tax credit.

The plan, known as the Tax Relief for American Families and Workers Act of 2024, is part of a months-long negotiating process between Republicans and Democrats that seeks to help working families while also “boost[ing] growth and American competitiveness,” a Jan. 16 press release from the U.S. Senate Finance Committee said.

The bill now moves to the Senate, where if passed, the deal would revive the child tax credit from the 2021 American Rescue Plan Act. After the end of that child tax credit, the number of children in poverty increased by 5 million in the following year.

The Center on Budget and Policy Priorities notes that while the proposed child tax credit is more modest than the American Rescue Plan credit, the expansion would particularly help black, Latino, and American Indian children. 

“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,” said Senate Finance Committee Chairman Ron Wyden. 

Here’s what to know about the deal.

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How much would the child tax credit increase?

Under the deal, Americans would see expanded access to the child tax credit through 2025. 

Larger families would especially benefit. Under current regulations, families with multiple children earn the same child tax credit as others with the same salary but only one child. The new deal would change the way child tax credit is calculated by allowing families to multiply the benefits per child. For instance, a family that makes $13,000 a year with two children would receive $1,575 per child, instead of $1,575 overall.

Lawmakers would also increase the refundability cap, or the maximum child tax credit families can earn per child, to adjust for inflation. The cap was previously $1,600 and would increase to $1,800 in 2023, $1,900 in 2024, and so forth.

Families who are eligible for this credit would also have the ability to choose whether they want to use their earned income from the current year or the year prior to calculate how much they would receive in child tax credit. The proposed child tax credit would not be distributed through monthly checks. Taxpayers would instead claim the child tax credit after filing their federal taxes.

Who is eligible?

Families with children who are dependents, under the age of 17, and have a Social Security Number that is valid for employment in the U.S. are eligible for the child tax credit. An extensive list of requirements is available on the IRS website.

Will the deal pass? 

The package will now advance to the Senate, which has a Republican majority. Sen. Chuck Grassley, a Republican from Iowa, expressed concerns about passing the child tax credit deal because it would help President Joe Biden’s reelection campaign.

“Passing a tax bill that makes the president look good—mailing out checks before the election—means he could be re-elected, and then we won’t extend the 2017 tax cuts,” Grassley told a reporter, according to NBC News. (This deal would not send physical checks, like those that were mailed out to Americans during the pandemic.)

Wyden originally wanted the deal to pass in time for the beginning of tax filing season, which began on Jan. 29, so that families could immediately see the tax credit applied to their tax return.

Families who have already filed their taxes will still receive benefits, though those will come retroactively.

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