House approves child tax credit bill, offering potential $700 break

The House of Representatives recently passed a bipartisan tax bill that would expand the child tax credit until 2025. The $78 billion package falls short of reviving the expanded child tax credit that was available during the Covid-19 pandemic. However, it would increase the maximum refundable tax break to $1,800 per child for tax year 2023, rising to $1,900 for tax year 2024 and $2,000 for the following year.

If the bill is approved by the Senate, families filing their 2023 taxes could benefit from the expanded credit. According to the Urban-Brookings Tax Policy Center, eligible families could see an average tax break of $680 this tax season. While there is support from both parties, it remains uncertain whether the bill has enough votes to pass in the Senate.

Low-income families stand to benefit the most from this proposal. Parents earning less than $200,000 per year, or $400,000 for couples filing jointly, and with children aged 17 and under qualify for the full child tax credit. Currently, families must earn at least $2,500 or have three eligible dependents to qualify for any amount. The maximum credit amount is calculated as 15% of income over $2,500.

The new proposal would allow taxpayers to take 15% of their income over $2,500 and multiply it by the number of eligible children they have to determine their maximum credit amount. While the income thresholds would remain the same, the refundable portion of the credit would be larger, benefiting low-income families. Additionally, families will be able to use the previous year's income if it increases their credit eligibility.

According to the Center on Budget and Policy Priorities, more than 1 in 5 children would benefit from the proposal in its first year, with 400,000 children potentially lifted out of poverty. The organization estimates that families of half of the 16 million children who would benefit from the proposal would receive $630 or more, with 40% gaining $1,000 or more. In the first year alone, 25% of the benefiting children's families would gain at least $1,400.

Overall, this tax bill aims to expand the child tax credit and provide larger tax breaks to low-income families. Its passage in the Senate remains uncertain, but if approved, it could have significant implications for eligible families during tax season.


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