The proposed tax cuts of around $78 billion would be allocated to both increasing the child tax credit and providing tax credits for businesses. Nevertheless, the bill may encounter challenges in gaining approval.
The statement was issued by the leaders of the key tax policy committees, Senator Ron Wyden (D-Ore.), who serves as the chairman of the Senate Finance Committee, and Representative Jason Smith (R-Mo.), who is the chairman of the House Ways and Means Committee.
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How Will I Benefit From Child Tax Credit?
The existing child tax credit stands at $2,000, with only slightly over 75% of that, or $1,600, being eligible for a refund during tax time.
Refundable tax credits are distributed as cash once an individual's tax bill reaches zero, while nonrefundable tax credits can solely be used to offset tax debt, and any remaining credit is forfeited.
According to the proposed legislation, the child tax credit aims to raise the maximum refundable amount to $1,800 for 2023 tax returns, $1,900 for the subsequent year, and $2,000 for 2025 tax returns.
The IRS specifies that you can claim the child tax credit if you have a child with a Social Security number valid for employment in the U.S. For the 2023 tax filing, a qualifying dependent should:
- Be under 17 years old at the year's end
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (e.g., grandchild, niece, or nephew)
- Provide no more than half of their own financial support during the year
- Have lived with you for over half the year
- Be correctly claimed as your dependent on your tax return
- Not file a joint return with their spouse for the tax year or file it solely to claim a refund of withheld income tax or estimated tax paid
Be a U.S. citizen, U.S. national, or U.S. resident alien
There's also an income cap for the child tax credit – parents earning more than $200,000 ($400,000 for joint filers) may not qualify for the full 2023 Child Tax Credit but could receive a partial credit.
The proposed legislation is primarily aimed at providing significant benefits to low-income families.
Senator Wyden emphasized that around 16 million children from low-income households would experience improvements due to this plan. In a statement, he highlighted the importance of seizing the opportunity to enact family-friendly policies, especially given the challenging political climate.
During the COVID-19 pandemic, the American Rescue Plan increased the child tax credit from $2,000 to $3,000 for children aged over 6 and from $2,000 to $3,600 for children under 6. Although these enhanced benefits were credited with a substantial reduction in child poverty in 2021, lawmakers allowed them to expire at the end of that year
This year, may I get a tax break?
Wyden stated that his aim is to secure approval for the measure in time for businesses and families to reap the benefits in the upcoming filing season.
The Internal Revenue Service is set to start accepting and processing tax returns on January 29, prompting lawmakers to aim for swift action on the bill.
Achieving this objective might pose challenges, given that lawmakers are currently in a rush to finalize their spending bills and are contemplating legislation addressing support for both Israel and Ukraine, as well as efforts to control the influx of migrants at the U.S.-Mexico border.
One possibility could involve House and Senate leaders attaching the measure to one of these high-priority bills
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