Senior MPs made the announcement on Tuesday. $78 billion bipartisan tax deal —Includes a retroactive increase in the child tax credit that could affect families' filings this season. But the proposed legislation could still face hurdles, experts say.
The plan would expand the child tax credit retroactively to 2023 by expanding access, increasing the amount of refundable credits and adding future inflation adjustments, it said. outline House Ways and Means Committee Chairman Jason Smith (R-Missouri) and Senate Finance Committee Chairman Ron Wyden, D-Ore., made the announcement Tuesday. The proposal would also restore business tax breaks that have expired.
Although less generous than the Enhanced Child Tax Credit enacted during the COVID-19 pandemic, this change would increase the maximum refundable tax credit per child in 2023 from the current 2023 The cap will be raised from $1,600 to $1,800. This cap increases to $1,900 for the 2024 tax year and $2,000 for the 2025 tax year, with an inflation adjustment.
The new law expands refundable credit eligibility for large families and allows taxpayers to use previous year's income to calculate the maximum credit if their income decreases in 2024 or 2025.
“It's very targeted, providing significant relief to millions of low-income households,” said Chuck Maher, vice president for federal tax policy at the Center on Budget and Policy Priorities.
If passed, the proposed bill could benefit about 16 million children from low-income households in the first year, according to the . projection It was released Tuesday by the Center on Budget and Policy Priorities.
After pandemic relief expires, child poverty in the U.S. will more than double in 2022, jumping from 5.2% in 2021 to 12.4%.
The changes are proposed to be retroactive to 2023, putting pressure on the bill to be enacted by Jan. 29, when tax season begins. “But even with the best-case scenario, we don't have a lot of time,” said Garrett Watson, senior policy analyst and modeling manager at Monetary Policy Bank. Tax Foundation.
The means to pass legislation are limited, and passing a stand-alone bill among other priorities can be more difficult. “That's the big risk. You end up putting it on the back burner or ignoring other concerns,” Watson said.
Lawmakers face two deadlines in fiscal year 2024 to pass a spending bill to avoid a partial government shutdown, with the first coming up on Jan. 19.
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