Tax Bill Progress in Congress

The major tax bill, dubbed by some as the “big and beautiful tax bill,” is making strides through Congress. But just how beneficial will it be for you?

Recently, the bill received crucial approval from a key Congressional committee on May 18th, paving the way for a potential House vote later this week. However, it’s important to note that this is just a step in the process. If it passes the House—still a big if—it will head to the Senate for further discussion and voting, where details could still change.

If the legislation goes through without substantial modifications—unlikely but not impossible—it could roll out higher standard deductions, especially benefiting seniors, increased child tax credits (CTC), and other elements aligned with President Donald Trump’s campaign promises.

The expanded child tax credits are expected to particularly help families. According to estimates, this increase could provide an additional $22.9 billion in benefits to families with children by 2026, according to the Tax Policy Center.

Child Tax Credit Details

The updated child tax credit under this prospective law will have several key features:

• The credit will increase to $2,500 per child until 2028.
• Post-2028, the credit will revert to $2,000, but it will be adjusted for inflation.
• To qualify, applicants need a Social Security number.
• The maximum refundable portion of the credit will not exceed $1,400 per qualifying child, with a potential refund cap of $1,700 available now.

Beneficiaries of the New CTC

While many families stand to gain, experts point out that the main advantages may skew towards middle- and high-income families. The Tax Policy Center noted that low-income families might not see the same benefits as higher earners when additional taxes are owed.

In fact, families might see an average increase in credits ranging between $700 and $800, while those on the lower end of the income scale could receive an estimated bump of just over $350. Moreover, the requirement for parents to have a valid Social Security number could disqualify millions of families from benefiting at all.

An estimated 4.5 million children who are citizens or legal residents could be excluded from receiving the CTC due to this stipulation, which requires both parents to have a Social Security number. It’s a significant number of affected families, especially in mixed-status households.

What Else is Included in the Tax Bill?

Beyond the child tax credits, there are other components of the tax proposals worth noting:

• The tax cuts from 2017, including the $2,000 CTC, will become permanent unless extended.
• Individual income brackets will see increases: $1,000 for individuals, $1,500 for heads of households, and $2,000 for married couples.
• A new additional deduction of $4,000 for seniors over a certain income level replaces a previous promise to eliminate taxes on Social Security income.
• New “MAGA” savings accounts will offer $1,000 for every child under participating parents’ names.
• The Clean Energy Tax Credit is set to expire soon.

Planning Ahead Amid Uncertainty

Planning around these tax proposals can be tricky. Both their final status and potential retroactive effects remain up in the air. For instance, certain proposals are backdated to begin in January 2025, while others are not effective until later.

Richard Pont, a CPA, suggests a few strategies for navigating this legislative landscape:

• Consider purchasing an electric vehicle this year, as the $7,500 clean vehicle credit will expire in 2025.
• If you’re looking into clean energy options, be aware that incentives will also expire sooner than previously expected.
• Energy-efficient home improvements could still qualify for a substantial credit, but act quickly since the credit deadlines are approaching.
• Lastly, holding onto your funds could be wise, as real estate tax exemptions are unlikely to decrease.