Congress announces major tax deal to expand child tax credit and revive breaks for businesses – NBC
“The proposal would deliver a meaningful income boost to millions of families in the first year. For example, consider a parent who has a toddler and a second grader and earns $15,000 working as a food server. In the first year, the family’s Child Tax Credit would increase by $1,725, from $1,875 to $3,600.
“Half of the roughly 16 million children who would benefit under the proposal in the first year live in families who would gain $630 or more. For nearly 40 percent of children who would benefit, their family’s gain would be $1,000 or more, and 25 percent of children are in families who would gain more than $1,400 in the first year. The gains for low-income families with more than one child — roughly three-quarters of children in low-income families are in this group — would be particularly large. Among children who live in families with more than one child and who would benefit, half are in families who would gain $1,000 or more in the first year.[2] For families who don’t now get the full credit because their incomes are too low, the gains would be larger when the proposal is fully in effect in 2025.
“Three important structural improvements to the Child Tax Credit’s design drive these gains:
- Moving to a “per-child” phase-in to ensure low-income families receive the same credit for each of their children, as higher-income families already do;
- Increasing and then effectively ending in tax year 2025 the lower maximum credit amount (known as the “refundability cap”) that only limits the credit for families with low incomes; and
- Allowing families to use their earnings from either the current year or the year before when calculating the Child Tax Credit so if their incomes drop — because they lost a job, faced health or caregiving needs, or welcomed a new child — their Child Tax Credit doesn’t fall as well (this is called a “lookback” provision and would start in tax year 2024).
“In addition, the bipartisan proposal would index the maximum amount of the Child Tax Credit, which is currently set at $2,000. This change would not take immediate effect and is expected to first increase the maximum credit in 2025 to $2,100.”