Will the Senate agree to this expansion? The fate of this bill is still undecided.
While the Senate is Still Pondering This New Bill, Democrats and Republicans Share Their Support
In recent news, the House has passed a staggering $78 Billion tax bill that would expand the child tax credit, albeit temporarily. The bill must first pass through the Senate, but thus far it has seen encouraging support from both sides of the political coin.
The bill sailed through the House by a vote of 357 to 70, which saw more support from Democrats than Republicans. That said, both Democrats and Republicans are speaking out in favor of passing this bill to increase the child tax credit.
“Last night, I voted to pass a tax package that would expand the Child Tax Credit for 79,000 kids in Memphis and TN-9, lifting many of them out of poverty.” This statement comes from Congressman Steve Cohen in a press release regarding the proposed expansion. “The bill would also increase the Low-Income Housing Tax Credit — which would benefit many families in my district and would help relieve the nationwide affordable housing crisis — and would restore the R&D tax deduction that incentivizes businesses to innovate and create real, local jobs.”
So, what is the next step? The bill now finds itself in the hands of the Senate, where it will need 60 votes to progress to President Biden’s desk.
Who Will Benefit from These Changes? Amazingly, This Tax Bill Has the Potential to Boost Millions of Families Above the Poverty Line
The tax bill is a part of the legislation known as the Tax Relief for American Families and Workers Act of 2024. It plans to enhance the child tax credit to offer some relief to lower-income families in need. While it is a smaller enhancement than what was seen during the pandemic-era increase, it would still positively affect so many lives.
This tax bill has the potential to change millions of lives for the better. If it passes in the Senate, it could help approximately 400,000 children in its initial phases, raising those families out of poverty. It will provide financial support to an incredible number of families – an estimated three million children whose families have low incomes.
In the next stage of the bill, the credit refund limit will rise so that by 2025, more than half of a million children will be boosted above the poverty line. An estimated five million families who are currently living below the poverty line will benefit from the receipt of additional financial support.
The Center on Budget and Policy Priorities, which adamantly supports the expansion as it will widen access to the child tax credit, estimates that an incredible 16 million children from poor or low-income households will benefit in the first year alone. An estimated half of a million of those children come from families with U.S. Veterans and active-duty service members.
How Much is the Proposed Newly Increased Child Tax Credit, and What Are the Limitations?
At present time, the child tax credit is $2000 per child. That said, the full amount is not entirely refundable. The passing of this bill would see the refundable amount increase to $1800 for 2023 returns. This would rise to $1900 for 2024 returns and would further increase to $2000 by 2025.
According to a report from the IRS, children under the age of 17 (by the end of the calendar year) who possess a Social Security number are eligible for the child tax credit. Parents will be able to claim the child tax credit for each qualifying child only if they have lived with them for more than half of the year and can be claimed as a dependent on their tax return. This extends to foster parents and other caregiving relatives, such as grandparents and stepparents, so long as the child meets all eligibility requirements set by the IRS.
In addition to the child’s eligibility requirements, the child tax credit imposes some income limits on the families. Higher-income households may find themselves limited in the amount they are able to claim from the child tax credit. Single filers must make an adjusted gross income of $200,000 or less to qualify for the full credit, while that amount for joint filers is less than $400,000. The child tax credit amount is decremented by $50 for every $1000 the filer earns above the salary thresholds.
Is the Senate Likely to Pass This Bill?
The Senate appears to be divided regarding the matter of passing this tax bill, though we do see support from both Democrats and Republicans. Senate Finance Committee Chairman Ron Wyden, who is a Democrat from Oregon, shared an agreement last month regarding the proposed legislation with House Ways and Means Committee Chairman Jason Smith, a Republican from Missouri. The two called this a “common sense, bipartisan, bicameral tax framework” that “promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.”
Bolstered by the confidence of this unlikely duo’s celebratory agreement, Senator Kevin Cramer, a Republican from North Dakota, who claims to be undecided on the bill, stated, “If Jason Smith and Ron Wyden can agree on something to this degree, that’s this complicated, I start with the notion that it’s certainly serious and we’ll take a look at it.”
Another vote of confidence came from Senate Majority Leader, Chuck Schumer, who expressed his support for the bill, saying he is currently working with Ron Wyden to figure out the best way to move forward.
On the opposing front, we hear from Mitt Romney, a Utah-based Republican, who told reporters that he is “not inclined” to support the proposed bill, though he does support tax provisions in general. He feels that this bill has the potential to cause more harm than good, stating that he does not support “adding a new entitlement that’s going to end up costing about $800 billion over a decade.”
The bill’s fate is currently in the Senate’s hands, so we all await the results to see if this revolutionary child tax credit expansion will be progressed to the President’s desk.
