Editor’s note: This story has been updated with additional information on the Child and Dependent Care Tax Credit.
Tax season is right around the corner with eligible Americans able to file their taxes between January and mid-April 2024.
The Child Tax Credit may change due to a bill working its way through Congress.
What Happened: The COVID-19 pandemic saw American families get stimulus checks to help offset job losses and lower wages.
Congress is working on helping American families with rising inflation and costs with an improvement to the Child Tax Credit.
A $78 billion deal passed the House Ways and Means Committee of Congress on Friday, receiving bipartisan support. The deal now heads to Congress for a vote ahead of the Jan. 29 date that the Internal Revenue Service (IRS) will begin accepting federal tax returns.
The Tax Relief for American Families and Workers Act of 2024 would increase the amount of child tax credits for eligible families with dependents 17 years of age or younger.
The maximum refundable child tax credit for a taxpayer is currently a maximum of $1,600 per child for the 2023 tax year.
The bill would increase the amount to:
$1,800 per child for tax year 2023
$1,900 in tax year 2024
$2,000 in tax year 2025.
For qualifying taxpayers, the Child and Dependent Care Tax Credit can cover up to 50% of qualified expenses, with a maximum limit of $8,000 for one dependent and $16,000 for two or more dependents.
The tax credit is based on earned income in the taxable year. Taxpayers can use their current or prior-year income to calculate the child tax credit for the 2024 and 2025 tax years.
Beginning in 2024, the child tax credit will be adjusted for inflation. That way, it keeps up with recent rises in consumer goods and the overall cost of living.
The bill would also expand several corporate tax breaks, which helped earn bipartisan support.
Related Link: Child Tax Calculator
Why It’s Important: The Tax Relief for American Families and Workers Act could provide a needed boost to help with the rising costs of living for families across the country.
It also revives the child tax credit that was previously part of the 2021 American Rescue Plan Act.
The new bill could also increase affordable housing with provisions put in place for incentives for companies to provide low-income…
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