As tax season comes to a close, families across America are on the edge of their seats, wondering about the fate of the newly expanded child tax credit. The big question on everyone’s mind is, “Did Congress pass the child tax credit?”
Let’s delve into the details, exploring the journey of this pivotal legislation and what it means for American families.
A Legislative Journey
Back in January, the U.S. House of Representatives ushered in a promising tax legislation worth $78 billion. This legislation was not just about numbers; it promised an expanded child tax credit and a host of tax breaks for businesses. However, this optimistic start hit a roadblock when it reached the U.S. Senate.
The bipartisan tax package found itself stuck in the Senate, with lawmakers grappling over various provisions. A notable concern raised by Senate Finance Committee ranking member Mike Crapo was the provision allowing families to use prior-year income for claiming the child tax credit. Crapo emphasized that this provision could transform the credit into a government subsidy rather than a relief for working families.
Senate’s Priorities and the Tax Package
While the child tax credit expansion remains in limbo, the Senate has been preoccupied with other pressing issues, including national security and the reauthorization of FISA. In an April 5th letter, Senate Majority Leader Chuck Schumer hinted at potential progress on the child tax credit in the coming weeks and months. Yet, as the April 15 tax deadline passed, the clock continued to tick for the tax package.
The Uncertainty Looms
As of now, the fate of the expanded child tax credit for the 2024 tax filing season remains uncertain. The tax package requires 60 votes to pass the Democratic-led Senate, and while the votes might be there, time is dwindling.
Should Congress enact changes to the child tax credit, eligible families could see immediate benefits upon receiving their tax refunds. The bill’s current form suggests a retroactive application to the 2023 tax year, meaning adjustments would be made automatically for those who’ve already filed their 2023 returns.
What Would the Expansion Look Like?
If the child tax credit expansion does pass, it won’t mirror the generosity seen under President Biden’s American Rescue Plan.
Here’s a breakdown of the proposed expansion under the House version:
- Increased Refundable Portion: Families with lower incomes and multiple children stand to benefit more. The maximum refundable portion would rise from $1,600 to $1,800 for the 2023 tax year.
- Adjustment for Inflation: The child tax credit amount would be adjusted to account for inflation.
- Income Determination Option: Families would have the choice to use prior-year income to calculate the refundable amount of the credit.
Policymakers believe that families with the lowest incomes and multiple children would reap the most benefits from this expansion. Even if this version of the CTC doesn’t materialize, there’s still some good news for the 2024 tax year.
The Cost of Expansion: Funding the Child Tax Credit
The proposed expansion of the child tax credit comes with a hefty price tag of approximately $78 billion. One of the pivotal points of negotiation between Democrats and Republicans has been the funding source. A potential solution discussed involves reclaiming a pandemic-era tax credit, the employee retention credit (ERC), to partially fund the new child tax credit.
The ERC Conundrum
The ERC was designed to incentivize businesses to retain their employees. However, the IRS detected a significant number of fraudulent claims related to the ERC. Consequently, the agency put a halt on processing new claims in 2023 and introduced programs allowing taxpayers to rectify potentially incorrect claims.
The Impact of the Pandemic-era Child Tax Credit
The expanded child tax credit introduced during the pandemic played a crucial role in keeping millions of children out of poverty. However, when this credit expired, there was a noticeable shift. Data revealed an increase in the poverty level from 5.2% to 12.4% as families lost the benefits of the expansion.
The Push for Restoration
Since the expiration of the federal expanded child tax credit, Democrats have been fervently working to reinstate it. Although previous attempts have fallen short, lawmakers now find themselves closer than ever to at least partially restoring the credit.
The Road Ahead for the Child Tax Credit
In summary, the question, “Did Congress pass the child tax credit?” remains unanswered for now. The Senate’s deliberations, competing priorities, and time constraints add layers of complexity to this issue.
While families await clarity, understanding the proposed changes and their potential impact can help them prepare for various outcomes.