Latest News on Child Tax Credit
A bipartisan bill that would extend the Child Tax Credit through 2025 has passed through the House Ways and Means Committee. The bill has passed the House and a vote in the Senate is expected soon.
Broad support from a diverse coalition of elected and community leaders, including pro-life and pro-family advocates, are supporting this bipartisan bill. US Conference of Catholic Bishops thank members of Congress for “renewed conversation and commitment on both sides of the aisle” in this effort.
Proposal could immediately affect millions of families filing their 2023 taxes. Over 36 million American families will benefit with greatest impact to children living below or near the poverty line.
Key Facts
The American Rescue Plan Act of 2021 temporarily expanded the child tax credit for the 2021 tax year to $3,600 per child younger than age 6 and $3,000 per child up to age 17.
The expanded child tax credit reached over 61 million children in more than 36 million households, and funds were primarily used for child care, food, housing and other basic needs.
In 2021 child poverty fell to its lowest level ever in America.
In 2022 Congress did not renew CTC expansion, child poverty surged by 41%.
Expansion of Child Tax Credit before Congress in 2024 has bipartisan support. A broad coalition of conservative and pro-life faith and community leaders and progressive community based organizations have come together to support the bill.
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.
A recent compromise would bring back an expanded Child Tax Credit through 2025, benefitting fifteen million children from low-income families. The framework of this deal was made possible by a bipartisan coalition of pro-life and pro-family advocates and elected leaders, including the National Association of Evangelicals, United States Conference of Catholic Bishops, American Enterprise Institute, and the National Hispanic Christian Leadership Conference, among many others. In display of bipartisanship, the Child Tax Credit expansion passed the House 357-70. The bill now awaits a vote in the Senate.
The bill would adjust the earnings requirements to take advantage of the tax credit, making it easier for lower-income families – those earning roughly between $10,000 and $50,000 – to get the full credit. These families would get an average credit that is about $1,130 higher than in 2022.
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.