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Building Stronger Communities: The Push for Permanent Child Tax Credit Changes

In the face of rising inflation, families all over the country have been searching for ways to alleviate their financial burdens. While tax season has come and gone, it's never too early to start planning for next year. Among the various tax credits available, there are some that have proven to be particularly advantageous for American families.

The Push for Permanent Child Tax Credit Expansion
Rally for Child Tax Credit Expansion. Alex Wong/Getty Images

One-Year Child Tax Credit Expansion: A Boost for Families

In 2021, President Biden signed the American Rescue Plan into law, which included the One-Year Child Tax Credit Expansion. This expansion raised the credit to $3,000 per child ($3,600 for children under the age of 6). Notably, it made the credit fully refundable for families who resided in the U.S. for more than six months during 2021, removing the previous $2,500 earnings floor. Furthermore, the IRS started issuing monthly payments to families from July to December 2021, covering half of the credit in advance.

Unfortunately, the one-year child tax credit expired at the end of 2021 due to opposition from Republicans and Senator Manchin. As a result, families can now only receive up to $2,000 per child under 17 years old, and the credit is only partially refundable. This means that if the credit exceeds your owed taxes, you can receive a refund for the difference.

To claim the Child Tax Credit, you need to list your children and dependents on Form 1040, the U.S. Individual Income Tax Return, and include a completed Schedule 8812, which pertains to Credits for Qualifying Children and Other Dependents.

The Empowering Impact of the Expired 2021 Child Tax Credit on American Families

The American Rescue Plan Act played a crucial role in preventing millions of families from slipping into poverty. According to an analysis conducted by the Urban Institute, making the changes permanent would have a profound impact, reducing child poverty by over 40% and benefiting more than 4.3 million children. Many tax economists assert that the American Rescue Plan Act has had a more significant effect in safeguarding the lives of our children than most other policies implemented in the past 50 years, highlighting its powerful contribution to communities nationwide.

The stipends provided through the American Rescue Plan Act had a transformative effect on families, enabling them to acquire essential items and meet their basic needs. In just one week after its implementation, The Economist reported a significant drop in the percentage of households with children experiencing food scarcity, declining from 13.7% to 9.5%. The impact was far-reaching, as nearly all families who benefited from the new tax credit utilized it to purchase clothing, food, household items, and cover other vital expenses.

The expiration of the 2021 Child Tax Credit reminds us of the importance of sustaining support for families and the community bonds that underpin it. It serves as a reminder of the positive ripple effect that comprehensive policies can have on society, fostering stability, resilience, and opportunities for families to thrive. As we reflect on the impact of this credit, let us continue to champion initiatives that prioritize the well-being of American families and ensure that no one is left behind.

Building a Stronger Community: A Push for Permanent Change

While American families did not benefit from the child tax credit expansion in 2022, there is hope on the horizon. U.S. Representatives Rosa DeLauro, Suzan DelBene, and Ritchie Torres have reintroduced the American Family Act, aiming to make the expansions from the American Rescue Plan permanent. If passed, countless American families will benefit from the child tax credit and monthly advance payments.

Additionally, a coalition of Senators including Sherrod Brown, Corey Booker, Michael Bennet, Ron Wyden, and Raphael Warnock are expected to reintroduce the Working Families Tax Relief Act (WFTRA). This act, if passed, would make the successful expansion of the Child Tax Credit and Earned Income Tax Credit from the American Rescue Plan permanent. The proposed expansion would benefit 40 million American families and 65 million children, providing them with a reliable source of financial stability through uncertain economic circumstances.

The Earned Income Credit Boosts Our Communities

Beyond the Child Tax Credit, another valuable tax credit to consider is the Earned Income Credit, designed specifically to assist low- and moderate-income taxpayers. The amount of the credit varies based on income and the number of children in the household. To quickly determine if you qualify, you can take a simple survey.

The proposed WFTRA would significantly expand the earned income tax credit, nearly tripling the maximum value of the credit for "childless workers." The expansion would also extend the age range for those who qualify, allowing both younger and older workers to benefit. This proposal also seeks to make the credit more accessible for adults transitioning out of the foster youth system, offering them greater opportunities to thrive.

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